What’s The Difference?
When starting a new business, you have a lot of decisions to make. One of the first steps is to start thinking about the type of business entity that you should form. The type of business can drastically impact your legal responsibilities. What you do now can impacts how your business grows over the next few years. Below are some of the commonly created businesses:
- General Partnerships (GP): A GP is when two or more people work as co-owners in a business for profit. You have to file a registration statement with the Secretary of State. While partners may decide among themselves how to do business, share profits, and control assets, they all share liability for wrongdoing equally. Joint and several liability is the worst aspect of general partnerships.
- Corporations (Corp.): A corporation has life of its own. If a sole proprietor or partner dies, the business ends or it may become involved in various legal entanglements. A corporation can continue on regardless of what may happen to its individual officers, managers, or shareholders. Also, ownership of the business may be transferred, without disrupting operations, through the sale of stock. The stockholders of the corporation are typically not liable for the ordinary debts of the corporation.
- Limited Liability Company (LLC): An LLC must file articles of organization with the Secretary of State. It can be managed by a manager or a member. Members benefit from limited liability, and the LLC itself is responsible for what happened in its direct control.
- S corporation (S-Corp): An S-Corp is simply a type of Florida corporation that has elected a special tax status. S-Corp status permits the income of the corporation to be passed through to the shareholders. This results in the shareholders reporting the income or loss from the corporation in their tax returns. S-Corp is limited only one class of stock and not have more than 100 stockholders unlike a Corporation.
Are you thinking of starting a new business? If you are, call me. I would be happy to help.