An experienced business law attorney can help you with business formation. When you decide to start a business, one of the main things to need to determine is the structure of your business. There are different legal structures for your business.
Sole proprietorship is the easiest business structure. Sole proprietorship is the most basic and common of all business structures. It is the simplest of all business forms. They are the easiest type of entity to form and operate. Sole proprietorship is a business without corporation or limited liability status. The owner represents the business legally and fully. You need not file any paper work with the state. All you need to do is declare your business open. However certain types of business will require licenses from the State and professional licensing bodies. Consult with an experienced business law attorney to know if your business requires any license. You should not operate your business without the required licenses.
A partnership is a business structure where two or more persons own a business, conduct the activities of the business together and share the profits or losses on an agreed basis. Although not legally required it is advisable to have a partnership agreement which will provide for the share of each partner in the partnership. The formation, organization and dissolution of partnerships are governed by state law. To form a partnership, the following issues must be decided amongst the partners:
- Share of capital to be contributed by each partner
- Each partner’s share of profit and loss
- Expansion and dissolution of the partnership
- How to settle disputes
- Authority of each partner
In general partnerships, each general partner possesses equal rights to operate the business. Each partner is involved in day-to-day operations of the business, and can take management decisions. A partner may also represent and act on the behalf of the business. In this form of business, actions of the one partner can bind the entire partnership – all partners are responsible for those actions. Limited partnerships have two types of partners – general partners and limited partners. General partners manage the business and are personally liable for the debts of the business. Limited partners contribute towards the capital of the business but are not responsible for the management of the business. The liability of limited partners is limited to their contribution towards the business. Limited partnerships are mostly formed primarily to encourage the limited partners to invest in the business and not exposing them to personal liability for the actions of general partners.
Another form of business formation is incorporation. You can incorporate your business as a corporation or a limited liability company. The requirements for formation of a corporation or a limited liability company will depend on your state law. A corporation and a limited liability company are independent legal entities separate from their owners. There are two types of corporations – C corporation and S corporation. When a corporation is formed, it is generally formed as a C corporation unless a specific S corporation election is made. In many states a limited liability company can have just one owner. An experienced business law attorney can help you with your business formation.