Company Formation

Limited Liability Company (LLC): In this business structure, the owners are not typically personally responsible for the company’s debts and liabilities. This protects the owners’ personal property in the event that the company gets sued or has to file bankruptcy. The IRS treats an LLC like a sole proprietorship or partnership in that the owners, also called members, include the business’s profits and losses on their own personal income taxes. However, the company can choose to be taxed as a corporation.  

Partnership: A business partnership is an arrangement between two or more parties who act as business owners, overseeing operations and sharing both the profit and liability of the business. In a limited liability partnership, certain partners may act as investors, be uninvolved with management of operations, and aren’t typically responsible for the business’s liabilities. In a limited liability partnership (LLP), partners are protected from the liabilities of other partners. For example, if a real estate agent is sued for a breach of contract, the other partners of their LLP agency would not be responsible for compensating the plaintiff. All partnerships are pass-through entities, meaning that the partners are taxed rather than the entity itself.  

Corporation: A corporation is a legal entity that is taxed separately from its owners. Corporations issue stock to shareholders. Many corporations are closely held, meaning all shares are owned by just a few shareholders. Those shareholders elect a board of directors to guide the corporation.