Business/Corporate Law

Limited Liability Companies ("LLCs")

An LLC is an entity in which the members generally have limited personal liability for company obligations. Members are the owners of the LLC; similar to shareholders in a corporation or partners in a partnership. Managers and members of an LLC generally are not liable for the LLC's obligations solely by reason of being managers or members.

Corporations

A corporation is an entity in which the shareholders have limited personal liability for corporate obligations. The shareholders are the owners of the corporation. At annual meetings, shareholders elect directors, who manage the corporation, elect and authorize officers to carry out corporate policies. Shareholders are generally not liable for corporation's obligations; however, there are circumstances where the corporate veil of limited liability may be "pierced" and the shareholders held liable for corporate obligations. The corporation is a separate taxpaying entity.

Partnerships

There are four types of partnerships - general partnerships, limited partnerships, limited liability partnerships and limited liability limited partnerships. A general partnership is created by an agreement between persons to carry on business together for a profit. In general partnerships and limited liability partnerships, each partner has the authority to bind the partnership. With limited partnerships and limited liability limited partnerships, however, there are two classes of partners - general and limited - with only the general partners having the authority to bind the partnership. Profits and losses in a partnership, regardless of type, are allocated to partners based upon their partnership percentage or in accordance with the partnership agreement. Personal liability of the partners for the obligations of the partnership varies depending upon the type of partnership.

Which Entity is Right for You?

Several factors may influence your choice. There are other tax and non-tax issues that you may wish to consider, such as self-employment tax liability, potential taxes if you combine with other entities and whether you plan to "go public" in the future. Decisions can have unintended consequences. Your attorney and financial advisors can assist you in reviewing your plans to help make a desirable choice. For a more in-depth discussion of entity choices and formation, click on the articles listed on the right.

 

 

 

 

 

 

 

 

 

 

 

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