When you are in the early stages of starting a business, you may find yourself facing a number of important decisions. You will need to decide whether or not you will be entering a partnership, or if you will be hiring a staff. You might need to sign a lease on office space, or secure a retail store front. On top of settling day-to-day logistical matters, you will also want to consider how you will structure your business. Knowing the difference between a partnership and corporation, as well as what an LLC or LLP is, can be important foundational knowledge as a business owner.
Deciding on which legal entity and structure makes sense for your business calls for much thought. Since there are sizable legal and tax implications for different distinctions, it is important to think holistically about your business and personal goals. Read on to learn more about limited liability companies, partnerships, and corporations, as well as how you can submit your forms online on one convenient website.
What is a Limited Liability Company?
Limited liability companies, often called “LLCs” for short, are incredibly common in the business world. In fact, if you start paying attention to the business names you come across in directories or advertisements, you will probably see those three initials more often than not. One of the main reasons for the popularity of LLCs are the protections that they offer in terms of liability.
Creating an LLC establishes your business as a separate legal entity, one which features the privilege of “limited liability.” This means that you can shield your personal assets in the event that your business faces bankruptcy or a lawsuit. There are also tax benefits to creating an LLC. The Internal Revenue Service (IRS) considers LLCs to be “pass-through” organizations. This means that business profits are not taxed directly, but rather, members of the LLC pay income taxes on their salaries.
Is a Partnership Right for You?
While the prospect of starting your own business can be an exciting one, is it also not for the faint of heart. The time, energy, and money that you will expend launching a business on your own are significant, and for this reason, many entrepreneurs decide to enter partnerships. In the business world, a “general partnership” exists any time two or more people go into business together. Sometimes this is a formal arrangement with legal documents drawn up accordingly, other times partnerships can flourish on a verbal agreement or handshake alone.
Partnerships can also experience the benefits of limited liability. By establishing an LLP–a limited liability partnership–you can form an agreement where individual partners can be found liable, but the business and other members remain protected. This structure of limited accountability for adverse events makes a lot of sense for licensed professionals. LLPs are often favored by accountants, doctors, and lawyers. It should be noted, however, that LLPs are not available in every state.
Deciding to Form a Corporation
Forming a corporation is not a decision that you should arrive at lightly, as it has very specific rules and regulations for operation. In order to create a corporation, you will need to file articles of incorporation with your state. You will also need to establish a board of directors and submit annual reports. While it is not typically required, many corporations also opt to create corporate bylaws and issue stock.
Corporations are also taxed differently, which is something you will want to consider as a business owner. Since corporations are their own entities, they must pay taxes. This means that you are effectively taxed twice: once on the income of your business, and then again on your own salary.
Whether you select to form a corporation, LLC, or LLP, you will have to file documents with your local Secretary of State. This can be done by sourcing the correct forms, filling them out, and mailing them–along with the requisite fees–to the appropriate state office.
Get Your Partnership and Corporation Documents Online Today
If you are in the planning stages of launching your own business, you likely have a lot on your plate. Let’s face it, your free time is scarce, and time spent filling out and mailing forms can be better allocated to generating revenue streams for your business. With that in mind, why not work with a private service that can help you submit the forms you need online in just a matter of minutes?
At the Corporation Center, we offer easy-to-fill web forms for business owners in all 50 states. By utilizing an SSL-encrypted web portal, we allow you to securely process your documents in a prompt and comprehensive manner. Take a moment to browse our website and see how we can help you. If you have any questions, please feel free to contact one of our helpful customer service representatives.