If you have a work at home business, you may be wondering what type of company you should set up. When setting up a company, you need to decide early on how you are going to structure your company. There will be legal pros and cons to all, but it will be up to you to decide which type of company would suit your best interests-Sole Proprietorship, Partnership, Corporation, Non Profit Corporation, or a Limited Liability Company (LLC) .It is advisable that you seek the advice of a professional before you commit yourself to any of the following basic options. The decision you make can have both legal and practical implications.
- Sole Proprietorship
This is the simplest form and is usually chosen by one person. This person is the owner and the worker, although sole proprietorships can have employees. Sole proprietors directly own the business and are directly responsible for its debts. This type of business is suitable for a business where personal liability isn't a big worry.
- Partnership
There are three different types of partnerships; general partnerships, limited partnerships and limited liability partnerships.
A general partnership is a form of a business entity in which two or more co-owners engage in business for profit. There is no limit on the number or type of partners to form a general partnership. Individual partners are liable for the partnership's debts and obligations.
A limited partnership is very different from a general partnership, and is usually set up by companies that invest money in other businesses or real estate. They also have passive partners called limited partners.
A limited liability partnership (LLP) is a general partnership that elects to be treated as an LLP by registering with the Secretary of State. An LLP structure shields the partners from liability, can operate more informally and flexibly than a corporation, and has full partnership tax advantages. LLP partners are statutorily provided full-shield protection from partnership liabilities, debts and obligations. It allows the members of the LLP to take an active role in the business of the partnership, without exposing them to personal liability for others' acts except to the extent of their investment in the LLP.
- Corporation
A corporation is a legal entity created through the laws of its state of incorporation, treating a corporation as a legal "person" that has standing to sue and be sued, distinct from its stockholders. A corporation will continue to exist even if the members or owners die or resign.
- Non Profit Corporation
A non profit corporation is a corporation formed to carry out a charitable, educational, religious, literary or scientific purpose. Its' funds come from public and private grant money and donations from individuals and companies. The federal and state governments generally do not tax nonprofit corporations on money they make that is related to their nonprofit purpose, because of the benefits they contribute to society.
- Limited Liability Companies
A limited liability company is a combination between a partnership and a corporation. Like an LLP, a limited liability company (LLC) has a separate legal entity from its members. Unlike a corporation, an LLC does not exist indefinitely, however, many states now allow an LLC to have a perpetual existence. This perpetual existence must be provided in the articles of organization or a written operating agreement, otherwise an LLC is dissolved at the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interest vote to continue the LLC). The shareholders (members or owners) in a LLC have limited liability to the company's debts. It is very important that you decide which of these five options is right for you as each has wide-ranging differences. Please consult an expert before making your final decision.
A great place to start your research and save money on forms, legal fees, etc. is US Legal Forms. Their website has sites on legal forms, law digest, legal definitions, lawyers, form subscriptions, form subscriptions for public libraries, and search law.
Deborah Bowman has been a dance teacher/choreographer for 30 years. Born into a family of dancers, her family has owned and operated a dance studio for the past 58 years. Not only does Deborah love to teach and choreograph dance, but she also loves to write. Deborah has recently started her own home-based business. She holds a Bachelor of Science degree in Arts Management/Professional Studies from Duquesne University. http://www.997MakeMoneyNow.com/pages/264.htm
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