Business Organization Information Center
If you are starting a business, selecting the business structure is one of the most important decisions you will have to make. Contact an attorney who has experience advising clients about business organizations to discuss your options.
Partnerships, corporations and limited liability companies all have advantages and disadvantages. If you would like to learn more, contact a business and corporate attorney.
Tax consequences and personal liability for your business’s obligations and debts are two main issues that may affect your decision about which business structure to select. Contact a business lawyer who can help you evaluate your options.
While the type of business organization you select is an important decision, it is possible to change business structures as your business grows and changes. If you are thinking about changing business structures, contact an attorney to learn more.
Business Organizations Resource Links
State laws on corporations
Links to state corporate statutes, provided by the Legal Information Institute (LII).
Tax information for partnerships
Tax information for partnerships and partnership-related articles, provided by the Internal Revenue Service (IRS).
Tax information for corporations
Tax resources for corporations, including tax forms, provided by the Internal Revenue Service (IRS).
LLCs, corporations and partnerships
Terms and concepts relevant to LLCs, corporations and partnerships, provided by the Legal Information Institute (LII).
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Business formation is often the most important step in creating a successful business plan. The decisions you make during start-up can affect your business for years and decades to come. At Paul Billings Law, I have been helping business owners in and around Memphis, Tennessee, with their most critical legal problems since 1984.
To learn more about business formation, please review the general information on this page and visit our business formation practice area page. Contact my law office to find out how I can help you get your business off to a prosperous start.
Business Organizations – An Overview
Choosing the proper business organization structure is one of the most important decisions that a business owner must make. The type of organization will determine how the business handles tax matters and whether there is protection against personal liability. A business owner should consider several factors in choosing a business structure, including the number of individuals in the business, type of business, profitability of the business and insurance. The following overview provides a brief description of some of the more common types of business structures. A corporate and business lawyer at Paul Billings Law in Memphis, TN, can provide you with more information and help you determine which business structure best fits your specific needs.
In a sole proprietorship, a single owner controls all assets used in the business and retains all profits of the business. A sole proprietorship is easy to form, simple to operate and subject to minimal regulation. The IRS considers the sole proprietorship and the owner one legal entity. Therefore, the owner reports all of the business’s profits and debts on his or her own personal tax return. The owner is also fully responsible for any liability that the business may incur. His or her personal assets are not protected from the business’s creditors. Likewise, any of the owner’s personal creditors may pursue the business’s assets in order to satisfy the owner’s personal debt.
A partnership is basically an association of two or more people for the purpose of operating a business for profit. A partnership is classified as either general or limited. To form a general partnership, the parties must simply agree to enter a partnership, either orally or in writing. General partners are subject to personal liability for the debts and obligations of the partnership. General partners are generally entitled to participate fully in the management of the partnership and owe a fiduciary duty to one another. Limited partnerships must be organized under a state law, which may include filing a certificate of a limited partnership with the state. A limited partnership is made up of one or more general partners and one or more limited partners. Limited partners cannot generally exercise much control over the business and their liability is limited to their investment in the business. A registered limited liability partnership (LLP) is a partnership in which partners, with some exceptions, are not liable for damages caused by tortious acts or misconduct by the other partners. Professional partnerships, such as law and accounting firms, often elect to become LLPs because of the additional protections provided by this structure.
A corporation is created by filing the required documents with the appropriate authorities in the state in which the corporation is to be incorporated. By incorporating, a separate legal entity is formed. This separation shields the corporation’s shareholders from liability for debts and other obligations of the corporation. A corporation typically has a board of directors, elected by the shareholders, which oversees the business strategy and dealings of the corporation. The board in turn selects officers to oversee day-to-day management of the corporation. More information about the corporate structure, including the C Corporation, S Corporation and statutory close corporation, is available on the Corporations topic page.
Limited liability companies
A limited liability company (LLC) is a non-corporate entity. This means the members of an LLC have limited liability for debts and obligations of the company, but it also means they can participate in management of and exercise control over the business. The main purpose of the LLC is to provide individuals with a business entity that avoids some of the complicated regulations of a corporation, but still provides its owners with limited liability. The LLC owners are only liable for the amount that they have invested in the LLC and are not liable for any further liabilities or obligations of the LLC beyond their investment. An LLC is generally taxed like a partnership and does not pay separate federal income taxes.
Other types of business organizations
- Business trusts – A business trust is an unincorporated business entity in which property is transferred to trustees. Beneficial owners, who hold certificates similar to stock certificates in a corporation, manage this property for them.
- Joint ventures – Similar to a general partnership, a joint venture is an association of two or more people or entities who contribute money, property, skills or other assets to a separate entity to pursue a particular undertaking.
- Non-profit corporations – The main goal of non-profit corporations is to advance a particular purpose or objective, generally public, religious or charitable in nature.
Speak to a business law attorney
It is important to have a clear understanding of the various business structures to best achieve your business goals. Call today to schedule a consultation. An lawyer at Paul Billings Law in Memphis, TN, can provide you with the advice and information you need to select an appropriate business structure and make your business a reality.
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