Company Formation Services

When you are forming a company there is a lot to think about-- startup costs, liabilities, taxes, employees, etc. But one of the most fundamental decisions you must make is the type of business organization you choose to have for you company. Below is a general discussion of Corporations, Limited Liability Companies ("LLC") and Partnerships, including the advantages, the disadvantages, and exactly what each of these business organizations are.

A Corporation is a business entity that has the legal authority to act as though it were an individual rather than a large organization. It can have single or multiple owners, and it will be a separate legal entity from its owners. It provides limited liability for its owners, meaning that generally the owners are only liable for any capital they have in the business. A corporation pays its own taxes, unless it elects S-Corporation status, in which case the shareholders will report the corporation's taxes on their own tax forms.

Some of the advantages of choosing to make your company a corporation include the limited liability for owners as well as the ability to raise capital for your business through the sale of stock. However there are disadvantages as well, which include the expense in organizing and running a corporation, and, of course, all of the administrative duties that are inherent in a corporation.

A Limited Liability Company ("LLC") is a type of business that can have either single or multiple owners. Its name comes from the fact that an LLC provides limited liability for its owners, meaning that the owners are liable, at most, for any capital they may have in the business. However an LLC is taxed as though it were a partnership, which means that the owners will report their share of the business on their personal tax forms.

The most obvious advantages to an LLC are those discussed above-- the limited liability for the business owners and the fact that it is taxed like a partnership. Additionally, an LLC is considered a separate entity, much like a corporation. One obvious and important disadvantage though is the fact not all states allow formation of an LLC. Other possible disadvantages include that it can be somewhat expensive to set up an LLC and it has more administrative duties than a partnership does

A Partnership, is a type of business that has two or more owners. All of the partners will share in the profits as well as the losses, and all of the partners are equally liable for all debts and claim of the partnership. Each of the partnership's owners will report their share of the business taxes on their individual tax returns.

The advantages of having a partnership are twofold. First, is the fact that a partnership is very inexpensive to get organized. There are no real formalities that go along with the creation of a partnership, and no filing fees must be paid when you start a partnership. Second, you will not have all of the administrative duties that you will with other types of business organizations, such as having shareholder meetings or issuing stocks. As with all things though there are disadvantages, with one of the main being the fact that partners have unlimited liability, meaning that the individual partners can be sued for partnership business. In addition, a partnership is not separable from its owners except to the extent that a partnership can have both property and debts in the name of the partnership..