Legal Forms of Business
LAW/531

Legal Forms of Business

Sole Proprietorship
My first business was a sole proprietorship I did handy-man work for friends, and word spread that I was in business and it was easy to start. I reported to myself, paid myself, and I was responsible for everything. The liability was solely on me on a day-to-day basis. However, I wanted to grow, hire employees, buy more equipment, and rent an office space. I needed funding and banks treated me as if I was Jessie James ready to make a run for the hills with their money.
Partnership
A partnership is a little more complicated to start and all partners are equally liable for debts and obligations of the business. The partners can agree to change the priority of distributions among themselves. Partners are jointly liable for the contracts and debts of the partnership. This means that a third party who sues to recover on a partnership contract or debt must name all the partners in the lawsuit. Death does not end a partnership; the next of kin have a right of survivorship.

Limited Liability Partnership
LLP is a partnership that allows limited partners to enjoy limited personal liability while general partners have unlimited personal liability. The general partners have control of the business, so have full responsibility. Limited partnerships is that in some businesses, the limited partner (also called the passive investor) may be subject to special tax liabilities that can offset the tax shelter advantages. The IRS tends to look at these facts on a case-by-case basis.
Limited Liability Company
LLC allows the owners of a business to distribute income to the partners while protecting them from personal liability for the debts of the business. The owners may issue stock to raise money to invest into the business. Must file articles of incorporation, hold directors, shareholders meetings, keep corporate minutes, and