Do you have a great idea for starting a business that you can no longer ignore? If you are thinking about putting your own years of experience and expertise to work by launching your own enterprise, that is a commendable mission. Entrepreneurship can be an especially rewarding practice, and being your own boss allows you to steer the ship when it comes to your livelihood. Of course, owning and operating a successful business is no easy task. In the early days, especially, you can expect to spend long hours–nights and weekends–working to get your business up and running. You can find yourself facing a litany of important choices, navigating everything from what colors to paint the walls in your office to who you will hire onto your team. During this phase, you may also want to think about how you will legally structure your business. Once you have made a decision in the regard, you may want to know where to look for partnership and corporation forms.
How you ultimately choose to structure your business can depend on a multitude of factors. You will want to consider your short- and long-term goals, as well as what your priorities are for issues like tax and legal liabilities. For many businesses, the limited liability company (LLC) is a popular choice, largely due to ease of setup and maintenance. For others, a limited liability partnership (LLP) or corporation makes more sense. It depends a bit on your state, but there are typically a number of options available to you with regard to legal structures for your business.
Are You Considering a Limited Liability Partnership?
In the world of business, it is not uncommon to enter into a partnership. By leaning on the experience and qualifications of a colleague or associate, you can combine your strengths in order to successfully grow your business. Any time two or more individuals launch a venture together, that is considered a general partnership (GP). A GP can be rather informal, sometimes agreed upon with a handshake or verbal contract. Sometimes, however, partners will add a layer of legal protection to their arrangement by creating a limited liability partnership.
At a fundamental level, an LLP establishes your business as its own entity. When you start an LLP, you also grant “limited liability” to yourself and your partners. This means that in the event your business faces bankruptcy or a lawsuit, the partners (owners) are able to shield their personal assets. While this is fairly similar to an LLC, an LLP differs in the sense that if one partner commits malpractice, they can individually be found liable without decimating the business itself. This accountability system makes LLPs especially common among licensed professionals like doctors, attorneys, and accountants. In some states, namely California and Nevada, licensed professionals are precluded from forming LLCs and must create LLPs instead.
In an LLP, you can also enjoy “pass-through” status with the Internal Revenue Service (IRS). This means that the IRS will not tax profits generated by your business until they pass through to the partners in your organization, who will then be taxed on their personal income. To start an LLP, though it varies from state to state, you will need to draft articles of organization and submit them to your local Secretary of State’s office.
Is a Corporation Right for You?
If having the capital for growth is a priority for your business, you may wish to consider drafting articles of incorporation. With a corporation, you have the ability to issue stock, which means that outside investors can purchase fractional shares of ownership in your company. This can give your business a quick and easy infusion of cash, which can be used to open a new location, hire more employees, or increase your advertising budget.
Corporations do need to adhere to more rules and regulations than, say, an LLC or LLP. They are a bit more rigid in their management structure as well. Before you decide to incorporate your business, you will want to acquaint yourself with the laws in your state. Also, certain corporate structures receive “pass-through” status with the IRS, while others do not. You should be aware of the possibility that your business could be taxed “twice.”
To form your corporate structure, you will need to draft articles of incorporation. This document should include some basic information about your business, its incorporators, and its registered agent (the individual in charge of legal correspondence). You will also need to provide the number of shares that you plan to issue.
File Your Partnership and Corporation Documents Online
At Corporation Center, we have all of the partnership and corporation forms you need on one convenient website. With just a few clicks, you can process your documents via our SSL-encrypted web portal. To learn more, contact one of our customer service representatives.