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BUSINESS FORMATION & PLANNING
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Why should you spend precious resources on business planning?
Launching a new business venture is one of the most exciting and challenging events of a career. With risks and pitfalls at every turn, the wise entrepreneur invests in up front planning so that their business is built on a solid foundation. Planning on the front end means less headaches and unexpected problems once your business is up and running -- a time when you can least afford the time and expense of putting out fires. |
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BUSINESS ENTITY DESCRIPTIONS
The following list provides a brief description of the most common types of entities available in most jurisdictions, i.e., Sole Proprietorship , Partnership/Joint Venture , Limited Partnership (LP) , Limited Liability Partnership (LLP) , Limited Liability Company (LLC) , S Corporation , C Corporation (regular corporation) , and Nonprofit Corporation . The descriptions explain some of the pros and cons applicable to these various types of entities. Notably, the list proceeds from the simplest to the more complex forms of entities, and from the least to the greatest protection against personal liability.
DISCLAIMER: This page does not provide an all-inclusive list of every type of business entity, nor a complete description of all of the issues to be considered in selecting an appropriate entity. Competent legal counsel by a licensed attorney should be obtained regarding the choice and formation of a legal business entity.
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- PARTNERSHIP / JOINT VENTURE
- LIMITED PARTNERSHIP (LP) – A limited partnership is an entity formed under state law by two or more “individuals” associated for the purpose of conducting a business for profit. The LP consists of one or more limited partners and at least one general partner (Note: general partners can be corporations in order to further limit personal liability).
PROS:
- The personal liability of limited partners is limited to their contribution of capital in the LP.
- There is no double taxation applicable to LPs. LPs are pass-through entities, which means that each limited or general partner is taxed at his or her individual tax rate for their share of the profits earned in the business, under his or her individual name and social security number. There is no business entity level tax, but the LP should file an informational federal return and K-1 forms should be sent to each limited and general partner representing their share of profits.
- ? There are no corporate formalities to conduct or maintain.
CONS:
- There is no limitation of personal liability for the general partners of the LP, which means that if someone sues the business and wins, they can attach a judgment against the personal assets of the general partner(s) including their personal bank accounts, car, and home.
- General partners are financial liable for the actions of their partners, which means that someone can sue the partnership for the conduct of one of the partners in his role as a partner in the business and the assets of not only that partner, but all of the general partners can be attached to satisfy a judgment.
- Limited partners cannot participate in the management of the LP.
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l ABOUT US l CONTACT US
This website is designed for general information only. The information presented on this website should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.
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