Forming a Business
So, you want to start a business? Starting a business is a time when many important decisions are made that can set the business up for success. One of the most important decisions in starting a business is the type of legal business form that the owners choose when starting the business. Operating a business without forming a legal business entity can put you and your assets at risk. Business owners should consult with a qualified attorney about the appropriate legal business entity to form.
Sole Proprietorships – These are business that are usually owned by a single person or family. While this does not require registration with the State Corporation Commission, it leaves the business owners personally liable for business debts and all profits or losses are reported as personal income or loss for tax purposes.
General Partnership – General Partnerships let you share profit, loss, and managerial duties among the partners, but each partner is still personally liable for any debt and profits or losses are reported as personal income or loss for tax purposes.
Limited Partnership - A limited partnership is a business entity made up of two or more people, with one or more general partners, who manage the business, and one or more limited partners, who are less involved in running the business. Limited Partnerships require registration with the State Corporation Commission.
Limited Liability Companies (LLC’s) – LLCs are one of the most popular legal entities because there it protects an owner from personal liability and also has favorable tax consequences. LLC’s require owners to file forms with the State Corporation Commission, designate a Registered Agent for service of official or legal documents, payment of annual fees, and other administrative tasks.
Corporations – Corporations are owned through stock and are complex legal entities that require licensing, taxation, and regulation requirements. There are more formalities, such as issuing stock certificates, holding annual meetings, keeping minutes, and electing directors. Under the umbrella of corporations, there are specifically “C Corporations,” which are taxed separately than the owners, and “S Corporations,” which are not taxed separately from the owners. Whether a corporation is the appropriate entity for a business owner depends on the size of the business, the number of business owners, the role of each owner (whether each owner will be actively involved in management of the corporation), and other factors.
The attorneys at Schempf & Ware can assist you in forming your new business and filing all necessary paperwork. Schempf & Ware can also serve as your Registered Agent to ensure compliance with all requirements. Contact us today to set up a consultation.
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