Business owners need to decide what form of business entity they want their company to be. This process of choosing can be a difficult task, which is why it is important to have a corporate attorney in Orange County, CA to help them pick the right one. Learn about the most common forms of business entities by reading through this article.
1. General Partnership
A general partnership or a joint venture is the least expensive type of business entity to form, not to mention the easiest. This is because in a general partnership, no documentations and other filings need to be done with any agency. The only imperative requirement is that a signed written agreement be made between the involved people so that each one’s roles and responsibilities are defined accordingly. Moreover, since there is no filing or documentation with an agency required, the individual partners can choose to remain anonymous and keep their privacy.
One disadvantage of this kind of business entity is that all partners are jointly responsible for any obligation, debt and liability that one partner incurs. It’s an one for all and all for one accountability scenario.
Unlike a general partnership, a corporation requires articles of incorporation filed with the secretary of state. If there is no close corporation formed, a centralized management is usually chosen in a corporation where there are directors and officers elected annually. All profits and losses are indiscriminately allocated to each shareholder. Moreover, corporations (except for Subchapter S corporations), are subject to double taxation (first during the corporate level and second when profits are distributed among stockholders). Of course, the company itself is taxed and not the stockholders because the company is viewed by the government as an individual entity apart from its owners.
What makes a lot of companies decide to incorporate is the fact that a corporation provides limited liability to its business owners. Basically, if there is no fraud or the like, then owners have absolutely no liability for any of the company’s obligations.
3. Limited Partnership
A limited partnership is similar to a general partnership where there are at least 2 individuals or entities join to form the company. The difference is that in a limited partnership, one partner has full control of the company while the others only have limited control. This also means that that one partner has unlimited liability for partnership obligation while the other partners do not.
One of the disadvantages of this setup is that it is more complicated compared to the other forms of business entities. This is why, although a limited partnership does not require a written agreement, most limited partners request one made so that the partner with unlimited control will be made accountable to operate the company according to the agreement made between them.
4. Limited Liability Company (LLC)
The setup of a limited liability company is like a cross of a general partnership and a corporation. The LCC has pass through taxation just like a general partnership and has a centralized management system just like a corporation.
There is a lot of flexibility in the structure of an LLC. The business owners of the company can have an agreement on how the company will be run and managed. They may decide to have managers just like how a corporation has board of directors or they may choose to have the members manage just like how a general partnership is managed by the partners.
Seek the Assistance of a Corporate Attorney in Orange County, CA
It is important that a business owner chooses the appropriate structure for his business. To know which business entity is best suited for your company, it is best to seek the counsel of a competent corporate lawyer in Orange County, California. Have one contracted at your convenience.