When forming a new startup, one of the most important decisions is selecting a legal structure or “entity type” for your company. This decision will have a long term effect on how your company operates, how it is able to raise funds, how it will pay taxes, and what kind of liability you hold as an owner. Our lawyers advise new business startups on the advantages and disadvantages of forming corporations, partnerships, and limited liability companies (LLC’s) in relation to their unique goals and circumstances. Our startup attorneys also help new companies create operating agreements, employment contracts, and other legal documents needed to outline their plans and protect themselves. Arkin.Law is a trusted local law firm that helps startup companies understand their legal situations and guides them to the right path.
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.
At Arkin.Law, our startup lawyers assist new companies with entity selection, drafting an operating agreement, filing forms and records with the government, and more. Get in touch with us today to receive a free consultation with an experienced startup attorney and get the support you need to start your business the right way.