At Estrada Legal, we not only help business owners create succession plans, but we also are available to help clients with the formation of entities. It is important to understand the differences between different types of entities and which might be best for you.
Here are four different types and some of the details involved:
1). Sole Proprietorships- If you have a business that is owned by one person, then you would classify the business as a sole proprietorship. These types of business entities are easy to form and are also relatively inexpensive. Importantly, the sole proprietor or owner of the business owns any asset or debt accumulated.
2). Partnerships- This type of business entity involves two or more individuals owning a business. These individuals use a Partnership Agreement to specify how they plan to share any profits or losses in regards to the finances of the business they own together. Partnerships are more complex and each partner can be liable to pay the entire debts of the partnership irrespective of the extent of participation in Profit and Losses or capital contribution into the partnership.
3). Limited Liability Companies or LLCs- These types of business entities can be comprised of members, managers, or any combination of the two. Some partners involved in an LLC may have limited liability or no limited liability for the debts of the business. An Operating Agreement is used to specify the agreement between members of the LLC.
4). Corporations- the formation of a corporation means that a new legal entity is created that remains separate from its owners. These business entities require more formal processes of taxation and board meeting must be held on a regular basis.
Estrada Legal is available to walk you through each entity and help you decide which works best for your business. Please contact us today for a consultation about your business and the legal aspects that come with managing your own business.