Small Business Formation

The choice of business organization type can advance achievement of business goals. Our firm provides advice in selecting business entities.

The types of entities considered, by way of example, include sole proprietorships, general partnerships, limited partnerships, limited liability companies, C corporations, and S corporations.

Clients need to choose the right type of business entity by considering several factors. They should consider several factors. These factors include the type of business and the property it will own.

They also need to think about expected profits and losses, financing needs, and investor goals. Management requirements and the number and type of employees are also important factors.

Finally, clients should consider the liabilities that owners and investors are willing to accept. All these elements will help clients make an informed decision about the best structure for their organization.

The company will create all the paperwork needed to start the business and outline the roles of the owners and investors. These documents can include articles of incorporation, bylaws, partnership agreements, operating agreements, subscription agreements, and related documents like shareholder agreements and financing agreements.

Sole Proprietorship

A sole proprietorship is the simplest form of business entity and does not require any formal legal action to set up. A sole proprietorship is, by definition, owned by a single operator.

A sole proprietorship might need to register its business or name. This requirement varies by state. Registering helps the business operate legally and protects its name from others' use. Sole proprietorships must obtain appropriate business licenses and permits.

A sole proprietorship makes it easy to put personal funds and property into the business. There are few legal and tax issues involved in this process. The primary disadvantage of using a sole proprietorship is that it subjects the operator to unlimited personal responsibility for the liabilities of the business. As a result, the sole proprietorship should only be selected in a limited number of business contexts.

General Partnership

A partnership is when two or more people or companies agree to work together. Each party contributes money, property, or services and shares management duties. The partners share profits and losses, as well.

In a general partnership, all partners can make decisions for the partnership. They are also personally responsible for its debts and obligations.

A partnership itself is not taxed. Instead, the partners share the profits and losses according to their partnership agreement. Profits and losses go to each partner, who pays taxes based on their individual tax rates.

Limited Partnerships

A limited partnership is similar to a general partnership. However, it has "limited partners."

These limited partners are only responsible for the money they invested in the partnership. They are not personally liable for any additional debts. A limited partner may not participate in the management of the limited partnership if he or she wants to retain this limit on personal liability.

Every limited partnership must have a general partner. The general partner is responsible for running the partnership. The general partner is also personally responsible for the partnership's obligations. Generally, limited partnerships are taxed in the same manner as the general partnership.

Forming an LLC

Limited liability companies (LLCs) combine the benefits of both corporations and partnerships, offering flexibility in management and protection from personal liability. In an LLC, members have limited liability. This means they are not personally responsible for the company's debts. They only risk losing what they invested in the business.

This structure allows pass-through taxation. This means that profits and losses are reported on the members' personal tax returns. As a result, they avoid the double taxation that C corporations face. LLCs offer more flexibility in management, allowing members or chosen managers to run the business.

LLCs provide flexible management options. Members or selected managers can run the business.

This flexibility attracts small business owners who want to protect their personal assets while maintaining control over their operations.

C Corporation

A corporation is a separate legally recognized entity which is distinct from its owners, managers and officers. The owners, or shareholders, elect a board of directors who are responsible for the day to day operations of the corporation.

A corporation has a key advantage. It protects shareholders from being personally responsible for the company's debts and obligations. Generally, a shareholder's liability is limited to the amount that each invests in the corporation. To ensure this protection, it is important to capitalize the corporation adequately and to observe the requirements for maintaining it.

Regular corporations, or C corporations, are taxed as separate entities. In addition, as profits are paid as dividends to the shareholders, the shareholders must also pay taxes on the same dollars earned by the corporation. This concept of "double taxation" makes the C corporation form often unadvisable for a small or start-up business.

S Corporation

An S corporation, formerly known as a Subchapter S corporation, is like a C corporation, except for tax purposes. An S corporation is taxed like a partnership, passing profits and losses to shareholders based on their ownership percentage.

This avoids the double taxation problem of the C Corporation. An S corporation isn't suitable for every business. It can have a maximum of 35 shareholders, who must be individuals, not other companies or partnerships. Additionally, it can only issue one type of stock.

Start ups

Our firm will assist the new business as it starts up. These services may include preparing employment agreements, drafting consulting agreements, preparing or reviewing leases for office or retail space, registering trade names or trademarks, and filing appropriate fictitious name certificates. In addition, the firm can assist with the myriad of other requirements that face most new businesses including, for example, evaluating and obtaining adequate insurance, obtaining appropriate state and local permits and licenses, making necessary tax filings, establishing bank accounts, qualifying to do business in other states, obtaining tax identification numbers, and preparing permanent business books and records.

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