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Shah LAW Firm, PLLC
FAQ - business law
Business Law. Choosing the right legal entity is very important two-fold: 1) protecting your personal assets, and 2) minimizing tax exposure.
What type of business entity is right for me?
There are several types of business entities available. Some of the more popular entities include Sole Proprietorship, Partnership, C-corporation, S-corporation, and Limited Liability Company. Choosing the right entity is the first step in ensuring proper structural ownership of your business and understanding its liability protection, if any.
What is a Sole Proprietorship?
A Sole Proprietorship is a business owned and managed by one person. This person is personally liable for all business debts and obligations.
What is a Partnership?
A Partnership is a business owned by 2 or more people. Some of the more common types of partnerships include the General Partnership, Limited Partnership, Limited Liability Partnership, and the Limited Liability Limited Partnership. One of the benefits of partnerships is “pass-through” taxation. There are unique legalities with respect to each of the above-mentioned partnership types. Choosing the right kind of partnership is critical to ensure proper structure of ownership and exposure to liability.
What is a Corporation?
A Corporation is a legal entity that has shareholder ownership. There are many benefits of the corporation. Some of the main advantages include: limited liability for shareholders, the transferability of ownership, and perpetual existence. One of the main disadvantages of the corporation is the potential for “double-taxation.” The C-corporation is the default corporation type. Those corporations that meet certain standards can elect to avoid “double-taxation,” and create an S-corporation. There are unique legalities with respect to each of the above-mentioned corporations types. Choosing the right kind of corporation and following proper formalities is critical to ensure the protection that a corporation offers.
What is a Limited Liability Company?
A Limited Liability Company (LLC) is a legal entity that has member ownership. Members are afforded limited liability and have benefit from pass-through taxation similar to partnerships. There are pros and cons of forming an LLC with respect to the other business entities mentioned above. Choosing the right kind of entity and following proper formalities is critical to ensure the protection that you desire.
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