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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
A partnership or joint venture is a form of business enterprise in which two or more “individuals” (or entities) participate for profit. Individuals can be deemed to be in a partnership even if they have not entered into a formal partnership agreement. Absent a partnership agreement, state laws govern the rights and responsibilities of partners, such as requiring that each partners share equally in the profits of the business. A joint venture is a type of temporary partnership that is organized to carry out a particular business enterprise.
- PROS:
- There is no formal requirement to register a partnership with the state (although recommended)
- There is no double taxation applicable to the partnership. Partnerships are pass-through entities, which means that each 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, although the partnership is considered an entity separate from each partner, but the partnership should file an informational federal return ( IRS Form 1065) and K-1 forms should be sent to each partner representing their share of profits.
- There are no corporate formalities to conduct or maintain.
- All partners can act on behalf of the partnership.
- CONS:
- There is no limitation of personal liability for the partners in a partnership, which means that if someone sues the business and wins, they can attach a judgment against the personal assets of each partner including their personal bank accounts, car, and home.
- 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 partners can be attached to satisfy a judgment.
- All partners can act on behalf of the partnership.
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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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