Business-OrganizationsWhen a new business owner or entrepreneur wants to start a new business or purchase a business, most often the initial consideration is whether to incorporate the business or decide what unincorporated business entity will best benefit the business’ needs. Deciding what business organizations, such as a sole proprietorship, general partnership, limited liability partnership, or limited liability company, or as a corporation depends on various tax and other factors and considerations. For example, some businesses simply cannot be incorporated, while other businesses, like banking and insurance institutions, must, by law, be incorporated. On the other hand, clients involved in a wide range of business activities, can generally choose the form of business organization that best suits the business’ ownership and operational structures.

Business organization decisions involve tax considerations, the degree of individual liability, and the amount of control an individual wants to maintain over the business. For example, in a business organized as a sole proprietorship, the business is the individual as far as the law is concerned. That individual has full control and authority over the business but he or she also assumes unlimited liability for all debts and responsibilities incurred by the business. In a sole proprietorship, the business is taxed as an individual.

Our Charleston corporate lawyers advise clients on both tax and non-tax factors when considering organizing a new business or acquiring an existing one.
In contrast, a general partnership may best suit a business organization with more than one owner. A general partnership does not have significant exposure to liability.  The general partnership is similar to a sole proprietorship with the following two exceptions: (1) each partner has unlimited liability for the business’ debts and responsibilities, and (2) each partner has the implied authority to bind the business to third parties as long as it is within the scope of the business’s usual and ordinary activities.

Many business owners choose to  organize their businesses as a limited liability company because the partners, defined as members in a limited liability context, have limited liability as to debts and responsibilities. In addition, the members or one member may have full management power, and there are many tax benefits to the limited liability company.