Business Entity Selection
Corporation
• A corporation is an independent legal entity that exists separately from the people who own, control and manage it.
• It does not dissolve when its owners (or shareholders) die because it is considered a separate “person.”
• A corporation can enter into contracts, pay taxes, transact business, etc.
The owners have limited liability.
Limited Liability company
• A limited liability company (LLC) is similar to a corporation, but with slight differences.
• Like a corporation, it offers limited personal liability.
• An LLC is not required to hold regular stockholder or management meetings, and there are no requirements to comply with other corporate formalities.
Partnership
• A partnership exists when two or more persons co-own a business and share in the profits and losses of the business.
• Each of the co-owners or partners contribute something, usually money or real property, to the business endeavor.
General partnership
• A partnership where the rights and responsibilities are divided equally among the partners.
• The partners are referred to as general partners because each partner can act on behalf of all the partners, and each partner is responsible for the partnership’s debts and obligations.
Limited Partnership
• A partnership composed of both general and limited partners.
• This type of partnership allows each partner to determine and/or limit his or her personal liability.
• Unlike general partners, limited partners are not responsible for the partnership’s actions, debts and obligations.
• General partners have the right to manage the business. Limited partners do not.
• Both general and limited partners benefit from the business’s profits.
Sole Proprietorship
• A sole proprietorship is the simplest and most common structure chosen to start a business.
• It is an unincorporated business owned and operated by one individual with no distinction between the business and the owner.
• Sole proprietorships, when not operating under the owner’s legal name, must register a fictitious name with the Division of Corporations.