Business entities-formation-maintenance

1. Business Entities, Formation
Maintenance & Exit
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2. What to consider when selecting you business structure.
1. Liability/Risks
2. Tax allocation/tax exempt
3. Raise money/Funding
4. Type of paperwork needed
5. Need to register
6. Ownership limitations
7. Profit/non-profit
8. Closed/Public
9. Tax ID
10. Ongoing administration

3. Sole Proprietorship
A sole proprietorship consists of one natural person with no separate distinction between
the owner and the business. Some details to consider:
● In some states there is no need to register this entity with the state but if you use a
fictitious name then you will need to register the fictitious name
● Personal responsibility for debts and obligations
● Owner is taxed (not separate)
● Controlled solely by the owner
● Difficulty obtaining finance- no stock to sell and dependent upon owner’s financial
status alone
● Simplicity in maintaining ongoing administrative paperwork compared to the other
business entities

4. Partnership
A partnership includes two or more people who agree to do business together. The business
structure can be formed as a general partnership or a limited partnership, depending upon the
agreement of the members. Partnership is a pass through entity for tax purposes. Some details
to consider for each structure:
1) General partnership- the rights and responsibilities are shared equally between the
partners and so are the liabilities, debts and obligations. Registration is required. Risks
are shared by the partners.
2) Limited partnership-has two classes of partners: general partners who own and operate
the business and limited partners who invest their money or property in the business, do
not have the right to make decisions regarding the operation of the business, and do not
have personal liability for business actions, obligations, & debts.
Both partnership structures benefit from the profits of the business.

5. Limited Liability Company
A limited liability company is a company with limited liability of a corporation and pass-through
tax of a partnership or sole proprietorship. This entity has flexibility in its structure and doesn’t
require the formal structures of a corporation. Some of the distinctions in this entity include:
● A separate entity minimizing risk and liability to the owners
● Less regulation-can be managed by members, managers or member managers no board of
directors
● No corporate tax liability
● Ownership is more difficult to transfer than with a corporation
● Credibility with vendors, clients, banks as a distinct entity
● Easy to establish compared to a corporation

6. Corporation
A corporation is a separate entity from its owners and may raise capital by selling stocks of
ownership in the business. Other distinctions of this entity include:
● Tax advantages i.e. losses are fully deductible and medical insurance for families may be
deductible
● Employee stock options and stocks
● Attract investors
● Profits may be double taxed
● Entity survives its stockholders
● Easily transferable
● Corporate formalities and upkeep are higher than other entities

7. Contact us for additional information.