23 Mar The Basics of Business Structures
The laws governing business organizations are complicated. Be sure you have competent representation before you proceed. Corporate laws are very complicated to understand and they vary with the type of business structure that you choose to start. It is important that entrepreneurs understand the basics of business structures and also seek legal advice from experts to protect their personal assets.
5 Common Business Structures
1. Sole Proprietorship
A sole proprietorship is the most basic of all business structures and is easy to establish. You don’t have to take any formal action to form a sole proprietorship, however, you do need to obtain the necessary licenses and permits.
2. Partnership
This structure enables two or more people to start a business together additionally, involves more than one person in the decision-making process. Each partner contributes equally to all aspects of the business and shares the profits and losses of the business. It’s important to discuss a variety of issues upfront and develop a legal partnership agreement.
- Corporation
A corporation, sometimes called a C Corporation, is an independent legal entity owned by shareholders. The corporation is held legally liable for the actions and debts of the business, not the shareholders. A corporation is genuinely more complex due to administrative fees, tax, and legal requirements. Corporate management structure and major business decisions are governed by Articles of Incorporation, filed with the Ohio Secretary of State.
4. Limited Liability Company
Limited Liability Companies (LLC) allow flexibility in deciding management issues and major business decisions, while protecting owners from personal risks, such as lawsuits, that arise from the operation of the business. LLC also provides for pass-through taxation, where taxes are paid by the individual instead of the business.
Why Do I Need Legal Representation?
While there are advantages to these types of business entities, they may expose the owners of the business to personal liability. Personal liability means that creditors can execute against personal assets of the sole proprietor or partners, including wages, family homes, cars, and other assets. Incorporating a business or creating a limited liability company may better serve sole proprietors and members of a partnership. Our law firm can help. The form of business chosen for a business entity potentially affects every aspect of its operation. Our firm assists our clients’ information and business planning in deciding whether they want to operate as a closely held business, limited liability company, partnership, or corporation. We advise our clients about reorganization, trade association membership and activity, joint ventures, mergers, acquisitions, business successions, and shareholders’ rights.
Our firm works with you to gain an understanding of your businesses goals and needs while providing you the legal safeguards to protect your personal assets from risks arising out of your business.