Startups, Partnerships, Corporations & LLCs
The most commonly asked question in a business lawyer’s career is: “I’m starting a business, what kind of business organization should I choose?” The most common forms of business organizations are Sole Proprietorships, Partnerships, Corporations and LLC’s. With few exceptions, proprietorships and partnerships leave the individual owner or owners exposed to PERSONAL LIABILITY for all of the actions of the organization. While there may be other valid reasons (such as tax reasons and low exposure to liability) to use those forms, the most commonly recommended forms of business organization are those which shield the individual from personal liability. Those forms are: Limited Partnerships (where the General Partner remains exposed to direct liability); Corporations and Limited Liability Companies (LLC’s).
In addition to protection from personal liability, LLC’s, Corporations, and Limited Partnerships are used for tax planning, estate planning and a host of other planning considerations. However, their chief benefit remains the personal liability protection features of those various forms. The law treats a corporation or an LLC as a separate legal being in the eyes of the law. They have an existence separate and apart from the individuals who form them and, provided they are properly organized, funded and not ignored in the operation of a business, those forms WILL provide that insulation from liability to the owners.
Nevertheless, it may still be wise to use a non-limited liability form such as a proprietorship where the risks are low or may be adequately insured against. Most often, the reasons for doing so are based upon tax planning issues. We often work with our client’s accountant to provide the “right” answers to issues that are not strictly liability issues and we can assist not only in business planning but succession planning as well.
The answer to the question, “what kind of business organization should I use” depends on a number of different needs and circumstances which can best be assessed by your lawyer. Our experience in business start-ups includes assistance in the selection and formation of the appropriate business form. In addition, we can assist you with various licensing and planning needs that often accompany the business start-up.
Our experienced business lawyers would be happy to assist you and to work with you as part of your “start-up team”. Contact us to set up a free 30 minute consultation today.
Attorneys Curtis Rypma, Tyler Osburn and Gary Schenk practice in this area.