Business Formation Type
Are you considering forming a new business entity and are unsure as to what type of entity to create? The following chart summarizes the basics of each entity type, its benefits and limitations.
|Limited Liability Company||General Partnership||Sole Proprietor|
|Owners have limited liability for business debts and obligations||X||X||X|
|Created by a state-level registration that usually protects the company name||X||X||X|
|Business duration can be perpetual||X||X||X|
|May have an unlimited number of owners||X||X||X|
|Owner need not be U.S. citizens or residents||X||X||X||X|
|May be owned by another business, rather then individuals||X||X|
|May issue shares of stock that attract investors||X||X|
|Owners can report business profit and loss on their personal tax returns||X||X||X||X|
|Owners can split profit and loss with the business for a lower overall tax rate||X|
|Permitted to distribute allocations, under certain guidelines||X||X|
|Not required to hold annual meetings or record meeting minutes||X||X|
This was presented at Rainmaker BNI on Tuesday, June 14th, 2011 by Wendi D. Coley, CPA of Coley Accountancy. I felt that this was extremely relevant to my audience and I wanted to pass it on. Please check out Wendi’s web site at www.ColeyAccountancy.com.