A Close Look at Sole-Proprietorship & Limited Partnerships
Sole-proprietorship is a one-owner business. A sole-proprietorship is advantageous
because it may be established by anyone, with no requirements for filing
organizational documents or annual reports with the states. Additionally,
sole proprietorships are administratively easy. However, sole proprietorships
may not be the right option for you because the owner is also personally
responsible for all business losses.
Limited partnerships are partnerships with general and limited partners.
General partners run the business and are fully liable for the partnership
debts. Limited partners give up their right to participate in the management
of the partnership, but retain tax benefits and receive protection from
liability for partnership obligations.
Limited Liability Corporations (LLCs) are in between a corporation and
a partnership. Like a partnership, the members of the LLC provide capital
and manage the business. All the members are assumed to have a right to
participate in the management of the LLC. An LLC is advantageous because
it is typically taxed like a partnership.
What Is a Corporation?
A corporation is a business entity that is separate from its owners, and
is controlled by a board of directors for the benefit of its shareholders.
Typically, a corporation insulates shareholders against personal liability
for the debts or actions of a corporation. However, when a shareholder
treats the corporation as his alter ego to perpetuate a fraud or defeat
a rightful claim, a court may pierce the corporate veil and hold the shareholder
personally liable in order to obtain an equitable result.
A corporation is also advantageous because shares and interests in a corporation
are easily transferable. There are several formalities that must be met
in order to properly form a corporation. Our attorneys can make sure you
understand the laws to correctly run your corporation.
A corporation may qualify as an S Corporation if it is a domestic corporation,
has only allowable shareholders (such as individuals, certain trusts,
or estates, not partnerships, corporations, or non-resident aliens), has
no more than 100 shareholders, has only one class of stock, and is not
an ineligible corporation (such as certain financial institutions, insurance
companies, and domestic international sales corporations).
An S Corp does not pay tax on its net income at the corporate level. Rather,
an S Corp uses a cash method of determining profits for income taxation,
and is taxed like partnerships with direct pass-through to shareholders.
On the other hand, a C Corp pays a corporate tax on its net profits, and
then recipients of any dividends pay a personal income tax upon those
Understanding Non-Profit Organizations
A non-profit corporation is a corporation in which no part of the earnings
or profits are distributable to its members, directors, or officers. Profits
and earnings must be applied to further the corporation's purposes
or to expand its facilities. Many nonprofit corporations may be tax-exempt.
Additionally, the activities of nonprofit corporations are potentially
more flexible than those of for-profit corporations.
Our firm can assist you with weighing the advantages and disadvantages
of each type of business entity. Our attorneys will assist you in choosing
the correct formation of your business entity to effectively protect your
intellectual property, create tax planning, and manage your business.