Starting a new business venture presents you with three unique options: do you create a partnership, a limited liability company or a corporation? Here are some factors to consider.
- What is the intended lifespan of the company?
- How many investors are involved?
- What is the extent of the investors’ ownership and liability?
- How much time and money are you willing to spend setting up a business entity?
- What are the tax implications?
- How will you handle transfer of ownership and management?
Limited Liability Companies
Limited Liability Companies are owned by one or more persons or entities, and are formed by filing an article of organization with the state. In an LLC, members are not personally responsible for the debts of the company unless specified in the articles of incorporation.
Members may elect to treat the LLC like a corporation or partnership for tax purposes without having the liability issues of a partnership or restrictions of an “S” corporation. The LLC also must adopt an operation agreement how the company will be managed, how ownership is transferred, obligations of members and circumstances under which the LLC may be terminated.
The LLC will dissolve upon withdrawal, bankruptcy or death of a member unless otherwise specified. Like a partnership, financial interest in the LLC is freely transferable but management interest is not.
Partnerships are organizations of two or more entities joining to form a for-profit business. Business partners divide up both the ownership interest and management interest of the partnership.
Partners may assign their ownership interest (profits) to another partner without consent of the other partners, but consent is needed in order to transfer management interest (control) to another partner. Partnerships aren’t permanent and will dissolve in the event of bankruptcy, withdrawal or death of any partner.
When a partnership agreement is made, it will define the responsibilities of each partner as well as how profits and losses are allocated. The agreement will also set guidelines for ownership transfer and dissolution of the business.
It’s important to remember that in a partnership your liability is unlimited and personal assets are at risk, but partnership income isn’t subject to taxation. Usually each partner is taxed individually, but forms can be filed to have a partnership taxed like a corporation if tax savings can be made.
Corporations are owned by one or more people or business entities and the owners are issued shares of ownership. Directors, elected by the shareholders, set corporate policy and and assign officers responsible for business operations.
Corporations can own property, enter into contracts and litigation, pay taxes and conduct business through its officers and directors. Shareholders hold only limited liability and their risk is mostly limited to the value of their stock in the corporation.
Corporations are formed by filing a certificate of incorporation which establishes its name and purpose. They are, unlike partnerships, separate legal entities from their shareholders, meaning they exist perpetually and shares can be transferred without consent from other shareholders.
Corporate income is taxed twice – the corporation is taxed on its income and the shareholders are taxed on the income they receive. But shareholders who work for the corporation are eligible to receive tax-free benefits like life and health insurance. An “S” corporation is an entity that is taxed like a partnership but has the limited liability and other perks of incorporation.
If you have any questions about forming an LLC, partnership, or corporation in Kansas, contact us at 1-800-894-5931 or fill out our contact form to schedule a consultation at our offices in Hutchinson.
Whether you need a bankruptcy attorney, DUI lawyer, criminal defense attorney, divorce attorney—or assistance with estate planning or contracts—we have extensive legal knowledge to help you resolve your legal issue.
Get the treatment you deserve from an experienced team working diligently on your case. We are your advocates, tirelessly fighting for your best outcome.
When you have separated from your partner, you may disagree on many things. But one thing which still unites you is wanting to do what you feel is best for the child or children you share. Just because your relationship is no longer viable doesn’t mean that either of...
Declaring bankruptcy sounds overwhelming and scary, but it’s often the only option left for those who are in a difficult financial situation. To help inform you, we’re going to discuss how you can declare bankruptcy and also explain what you should expect when you do...
Child custody is probably one of the toughest parts of a custody dispute or separation process, but a successful mediation can make it a little bit easier on you, your co-parent, and most importantly, your child. We put together a child custody mediation checklist so...
Bankruptcy is your chance at a financial fresh start. We will take an honest look at the pros and cons of bankruptcy so that you can hopefully enter the process with some valuable peace of mind. The Pros Of Bankruptcy Although bankruptcy isn’t the most positive thing...
Estate planning is important, particularly for those who own real estate. We have provided an estate planning checklist below, but let’s talk a little more about why it is important to be prepared. Estate planning allows you to make decisions about what will happen to...
Call For a FREE Consultation
Get a winning team to fight for you when it matters most. Call us today!
Get a winning team to fight for you when it matters most.
Call for a Consultation: