A small business is a business that is privately owned and operated, with typically a small number of employees. Small businesses normally take the form of S-corporations, limited liability companies, partnerships or sole proprietorships.
If you intend to start a small business or currently own a small business, at some point you may need an attorney to assist you. An experienced small-business attorney can help you start your business, review and negotiate proposed leases, prepare contracts and assist in a number of areas with the operation of your small business.
Deciding on Your Business Structure
You may operate your business under any one of several organizational structures. Each type of business structure has certain advantages and disadvantages that should be considered. Please contact us to determine which structure is most suitable for your business. There are many factors here.
A sole proprietorship is one individual or married couple in business alone. This type of business is simple to form and operate, and may enjoy greater flexibility of management, fewer legal controls, and fewer taxes. However, the business owner is personally liable for all debts incurred by the business.
A general partnership is composed of two or more persons (usually not a married couple) who agree to contribute money, labor, and/or skill to a business. Each partner shares the profits, losses, and management of the business, and each partner is personally and equally liable for debts of the partnership. Formal terms of the partnership are typically contained in a written partnership agreement. Due to liability of general partners, general partnerships are not generally used.
A limited partnership is composed of one or more general partners and one or more limited partners. The general partners manage the business and share in profits as well as losses. Limited partners share in the profits of the business, but their losses are limited to the extent of their investment (i.e., limited partners are generally not personally liable for the debts of the limited partnership). Limited partners are usually not involved in the day-to-day operation of the business. Formal terms of the limited partnership are typically contained in a written limited partnership agreement. Limited partnerships have not been commonly utilized since the advent of limited liability companies.
A corporation has a more complex business structure and there are different types of corporations. Shareholders own the capital stock of the corporation. Shareholders elect directors to manage the corporation. The directors, in turn, appoint officers to oversee the day-to-day operation of the business. A sole individual may form a corporation. Generally, shareholders, directors, and officers are not personally liable for the corporation’s debts. Doing business as a corporation may also yield tax or financial benefits. Corporations may be formed for profit or nonprofit purposes.
A Limited Liability Company (LLC) is a business structure in which members own the membership units of the LLC. An LLC can be managed by one or more members or managers (a manager need not be a member). A sole individual may form an LLC. An LLC is similar to a corporation in that its members and managers are generally not personally liable for the debts of the LLC. Formal terms of the LLC are typically contained in a written operating agreement. Compared to corporations, LLCs are more flexible in that owners (i.e., members) can create specific terms for management, distribution of profits and losses, and other LLC matters. LLCs are permitted to engage in any lawful, for profit business or activity other than banking or insurance.