What Is the Best Legal Entity for My Particular Business?
When choosing the best legal entity for your particular business, you have a number of important considerations, therefore, you must think about what allows you to reduce liabilities, minimize taxes and ensure that the business can run efficiently. In addition, to continue in the event of your disability or death. Furthermore, it is important to consider liability exposure, tax consequences, attract investors, offer debt/equity and factor in the cost of operating the entity.
While, there may be more than one entity type that is right for your business, ultimately, only you can decide which is best by looking at and considering all the factors. Weigh the advantages and disadvantages of each type of entity and how each may or may not affect your particular business. Your business will go through changes, so the entity type may need to change as well.
Sole Proprietorship: First off, this is the most common business because it is owned by one person. Therefore, it is easy to start and does not usually require government filing. As a result, all income and expenses for the business are reported on the proprietorship’s personal tax return and he or she is ultimately liable for all debts and obligations.
Corporations: Secondly, a corporation is a separate entity from its owners for legal and tax purposes and is therefore responsible for all debts and obligations. It is comprised of shareholders who elect a board of directors to set goals and make major decisions and as a result, these directors appoint officers to run the business day to day.
Advantages of a Corporation
- Ownership in the business is freely transferable:
- Shares of the company may be sold to investors
- Corporations may take advantage of pension plans, medical payment plans, group life and accident plans, and other fringe benefits
- A corporation potentially exists perpetually, as long as corporate regulations and formalities are met. Therefore, there is no need to cease operations if a shareholder, director, or officer dies.
What is a Limited Liability Company(LLC)?
A limited liability company, or LLC, may be formed by one or more owners and are called members. It provides members with limited liability protection for their personal assets in most cases, just as a corporation does for its shareholders.
What Are the Types of Partnerships?
General Partnerships: An association with two or more persons as co-owners for profit. Besides a sole proprietorship, this is the easiest entity to form. Each partner will have personal liability for obligations of the partnership. Income, losses, and gains are passed to the general partners who can agree how it will all be divided.
Limited Partnerships: A partnership that requires a written partnership agreement. The duties are divided by general and limited partners. Limited partners have limited liability. Meanwhile, the general partner(s) are held personally responsible for all debts and obligations and therefore, may not take part in day to day operations.
Limited Liability Partnerships: Is formed by filing a registration certificate with the Secretary of State generally and are reserved for licensed professionals; ie: attorneys, medical professionals, accountants. In addition, these licensed professionals have limited liability protection. Therefore, they are generally not responsible for debts and obligations.
Finally, there are a number of other business structures available but these are by far the most commonly used.
Business Attorney Palm Beach Gardens
Offices of Paul J. Burkhart
Call the Law Offices of Paul J. Burkhart for all of your business and commercial litigation needs at 561.880.0155 or visit our website at http://paulburkhart.net/.
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