Thinking about beginning a business venture but don’t know where to start? One of the initial items you should examine is the way you want your company to be organized. Various structures are better for specific conditions, so understanding the core differences between business structural configurations is a crucial first step.
What’s a partnership?
Partnerships are created when two individuals start operating a business collectively. To be involved in a partnership, technically just two or more people would have to start behaving as partners. Usually, people don’t even realize they’re involved in a partnership. Although it is easy to form such partnerships, common possible problems can arise.
Fundamentally, partnerships are extremely flexible. Partners are able to structure their connection whatever way they want (voting rights, splitting profits 90/10 and so on) through putting it within the partnership contract. Still, with no partnership agreement, individuals are secured by the standard dictates in partnership law.
What type of business is a corporation?
Corporations are more demanding to get started than sole proprietorships or partnerships. They ask that whoever owns the company files through the state. But different than partnerships, corporations offer certain protections to the owners.
Of course, due to the fact that corporations distribute stock, they have the choice of exchanging stock. Public corporations are able to sell stock within the stock market.
What’s the discrepancy among a C-Corporation and an S-Corporation?
There are distinct obligations a business must fulfill before they can elect to convert into an S-Corporation, such as:
- Only have allowable shareholders such as certain trusts, individuals and estates and cannot include corporations, partnerships or non-resident alien shareholders
- Be a domestic corporation
- Have one sole class of stock
- Have not more than 100 shareholders
- Not be an ineligible organization (i.e. insurance companies, certain financial institutions and domestic global sales corporations).
Limited Liability Companies (LLCs)
What’s an LLC? Are they Corporations?
LLCs aren’t corporations but a type of combination of partnerships and corporations. Due to the reason that they have many benefits of both corporations and partnerships, they’re growing in popularity. LLC’s are usually held to be the most adaptable entity type.
If you’re still unsure about the type of business classification that’s right for you or you’re interested in changing the kind of company you own, a business lawyer could be exactly the right help. Contact us at the Law Office of Andrew Szocka for more information.
***This is not intended to be legal advice and you should consult with an attorney.