Business Organization Attorney Overview

Lawyer Assistance With Choosing the Correct Business Entity

When founding a business, it is important to ensure that the correct legal procedures are followed. In addition to taking steps to protect themselves by drafting valid, enforceable contracts and following federal, state, and local regulations, one of the most important decisions a business owner can make is the choice of business structure.

When choosing a business organization, it is essential to work with an experienced business law attorney. A skilled lawyer can provide advice about the best options for business owners and ensure that all legal requirements are met when forming a business.

Choosing a Business Entity

Business owners have a variety of options when forming their business, and each provides its own advantages. Possible business entities include:

• Sole proprietorship - When a business is owned by a single individual, they may operate the business without creating a formal business organization. The owner will report the business's income and losses as part of their personal income taxes, and they will be responsible for the business's debts or other liabilities.
• General partnership - Two or more people who own a business together without creating a business organization will handle matters similar to a sole proprietorship. The partners will report income and losses on their personal income tax returns, and they may be held personally responsible for the business's liabilities and debts.
• Limited partnership - If a partner invests in a business without becoming involved in its day-to-day operations, they function as a limited partner, with the other owners serving as general partners. Limited partners may only be liable for the amount they have invested in the business.
• Limited liability partnership (LLP) - This type of partnership allows all partners to serve as limited partners, only being held responsible for liabilities and debts based on the amount of their investment.
• Limited liability company (LLC) - This type of entity allows owners to participate in managing a business's operations while being shielded from being held personally responsible for the business's debts and liabilities. LLCs are "pass-through" entities, meaning that profits and losses are reported and taxed on the owners' individual tax returns.
• Corporation - When a business serves as a separate legal entity from its owners, it is considered a corporation. The corporation itself will be liable for debts or damages, rather than the owners. Businesses will typically be either S-corporations or C-corporations, depending on how they are taxed at the state and federal levels.

Each state has its own laws regarding business organization, and some types of business entities are not recognized by some states. When forming a business, it is important to work with a lawyer who understands state business laws. An experienced attorney can help owners choose the business structure that provides them with the protections and tax benefits they need, and they can ensure that all forms and paperwork are filed correctly.