The legal obligations of the Company cannot become the fault of any person associated with the Company. How do you want a legal form that offers the attractive characteristics of the three common forms of organization (company, sole proprietorship and partnership) and avoids the unattractive characteristics of these three forms of organization? The Limited Liability Company (LLC) does just that. This form offers entrepreneurs limited liability (a major advantage of companies) and no „double taxation“ (a significant advantage of sole proprietorships and partnerships). Let`s take a closer look at CLL. When setting up a business, its legal structure is one of the most important practical decisions of the owner. Each type of structure has its own advantages and considerations, which are influenced by the size of the business, the number of owners and employees, the industry and other variables. Each state has its own laws on business formation, and not all states allow all types of business structures. This means that the requirements for starting a particular type of business vary from state to state. Incorporation: Corporations are more complex entities to create, have more legal and accounting requirements, and are more complex to operate than sole proprietorships, partnerships, or LLCs.
One of the main disadvantages of a company is the high level of governance and oversight by the board of directors. Often, this prolongs decision-making when multiple shareholders or investors are involved. The sole proprietorship is the standard structure of a company that has not submitted documents to form a legal entity. It is the simplest form of business ownership and the structure of choice for four out of five small business owners without employees. A legal form of ownership in which ownership shares are listed on the stock exchange and management is carried out by professional executives. Sole proprietorship is a simple type of ownership with several advantages, including the following: The legal form of the business is one of the first decisions a small business owner has to make. Since this decision will have long-term implications, it is important to consult a lawyer and an accountant to make the right choice. Here are some factors that small business owners should consider before making their choice:Karen Collins, Exploring Business (Irvington, NY: Flat World Knowledge, 2009), 90; „Small Business Planner: Choose a Structure,“ US Small Business Association, accessed February 3, 2012 archive.sba.gov/smallbusinessplanner/start/chooseastructure/index.html. A corporationAn artificial person created by law, with most of the legal rights of a real person. „is an artificial person created by law, with most of the legal rights of a real person.
These include the rights to establish and operate a business, to buy or sell real estate, to borrow money, to sue or be sued, and to enter into binding contracts“ William M. Pride, Robert J. Hughes and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 157. (see Table 12.3 „Enterprises: Summary of Characteristics“). Companies make up 20% of all businesses in the United States, but they account for nearly 90% of revenue. Jeff Madura, Introduction to Business (St. Paul, MN: Paradigm Publishers International, 2010), 150. While some small businesses are registered, many companies are very large corporations – for example, Walmart, General Electric, Procter & Gamble, and Home Depot. Recent data shows that only about half of small business owners operate businesses registered in the United States. Matthew Bandyk, „Turning Your Small Business into a Corporation,“ U.S. News & World Report, March 14, 2008, accessed February 3, 2012 money.usnews.com/money/business-economy/small-business/articles/2008/03/14/turning-your-small-business -into-a-corporation.
Legal form in which two or more partners share ownership of a company. An LLC is a legal entity formed by the creation of an LLC operating agreement and the filing of memorandum of association with the Secretary of State. LLCs allow business owners to retain some of the benefits of sole proprietorship while limiting legal and financial liability, making them a popular ownership structure for small businesses. The most common forms of business ownership are sole proprietorships, partnerships, limited liability companies, limited liability companies (LLCs), serial LLCs, and corporations, which can be taxed as C corporations or S corporations. We`ve rounded up the most common types of business units and their notable features to help you choose the best legal form for your business. The disadvantages of incorporation are the increase in paperwork and administration. This includes one-time start-up costs, including accounting and legal fees, which can be in excess of $1,000.