Selecting a Business Entity For Your New Business
One of the first major decisions in connection with starting a new business is the choice of business entity. The more popular business choices in South Carolina are: (1) general partnership; (2) limited partnership; (3) limited liability company; and (4) corporation.
Generally speaking, our Charleston business lawyers find that entrepreneurs and professionals nine times out of ten will select a limited liability company in which to operate their business. For that reason, the following information will be primarily focused on the limited liability company as the choice of entity.
Partnership versus Limited Liability Company
There are a few common characteristics between partnerships and limited liability companies. LLCs are in many ways similar to partnerships due to the fact that both entities are contractual in nature (as opposed to corporations which are creatures of statute), can be operated by their partners/members, can be treated as flow-through entities for federal tax purposes, and can be subject to mandatory and default rules pursuant to the South Carolina Code of Laws.
Although partnerships and LLCs have many common characteristics, significant differences exist between these entities. Both partnerships and LLCs are subject to contractual agreements (partnership agreement for partnerships and limited liability company agreements for LLCs) entered into among the parties, they are different in the way they are organized, registered and terminated, and the responsibility the owners have in connection with the entity’s liabilities. With respect to the owner liabilities, the major advantage of an LLC compared to a partnership is that members of an LLC are not liable for the debts or other obligations of the LLC merely because of their membership. The entities may also be different in the way they are operated and treated for federal and state income tax purposes. Click the link below more detailed information on partnerships.
Limited Partnership versus Limited Liability Company
There are a few common characteristics between limited partnerships and limited liability companies. Of all the different choices of business entities in which to operate a business, LLCs are compared most often to limited partnership due to the numerous similarities between the two entities in the way they are formed, owner liabilities, state and federal tax treatment, termination, and South Carolina mandatory and default provisions pursuant to the Code of Laws.
Although limited partnerships and LLCs have numerous common characteristics, several differences exist between these entities. These differences exist in the way these two entities are organized, operation and management structures, owner liability, and termination of the entities. Limited partnerships also require one person (the general partner) to manage the partnership and be liable for the debts of the partnership which is distinct from the members of an LLC. Click on the following link below for more information on limited partnerships.
Corporation versus Limited Liability Company
There are a few common characteristics between corporations and limited liability companies The most significant commonality is that corporations and LLC’s offer shareholder and members limited liability if the business is properly structured. Both business entities provide protection from personal liability to the shareholders and members against third parties for corporate or LLC debts and obligations.
Although corporations and LLCs have several common characteristics, a few differences exist between these entities. The most significant difference the LLC possesses is its flexible business structure, especially with respect to its management and control of the LLC, and greater flexibility in its capital structure, distributions, transfer of membership interests, state and federal income tax liability, and termination procedures.
Protecting the Business Entity’s Trademarks
A business entity’s brand is one of the most valuable assets of any business. Business names, symbols, phrases, logos, and other distinctive trademarks are developed by business owners at great time and expense. Thus, trademarks are extremely valuable to entrepreneurs, inventors, startups, and small businesses that offer an attractive product or service in the marketplace.
Selecting the appropriate trademark for the name of the business entity (e.g., trade name) is often a critical as well as personal item in the decision-making process for a business owner. Trademarks therefore should be addressed during the preliminary stages of any business organization. It is extremely important that every business owner starting a new business in South Carolina ensure the name and brand design are available for use before entering the marketplace in order to avoid potential trademark infringement lawsuits.
Contact our Charleston Business Attorneys
If you are starting a new business in South Carolina and need guidance with organizing a business entity, please contact our law firm by giving us a call, filling out the contact form to your right, or sending one of our lawyers an email.