legal business forms by smashingpumpkins

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									LEGAL FORMS OF BUSINESS
Sole Proprietorship Ownership By a single individual Partnership Corporation Sub-S Corporation By shareholders: number of shareholders limited to 75 Limited Liability Partnership 2 or more persons or entities (except law firms) Limited Liability Company 1 or more persons or entities (except certain providers of professional services and law firms) File Articles of Organization. For nonHawai`i companies, file Application for Certificate of Authority

By two or more persons

By unlimited number of shareholders

Business Registration (State Department of Commerce and Consumer Affairs)

Not required, unless public notice of trade name is desired

Within 30 days after formation, file certificate of limited or general partnership

File Articles of Incorporation. For non-Hawai`i corporations, file Application for Certificate of Authority and Certificate of Good Standing

Same as regular corporation

File certificate of limited liability partnership; for non-Hawai`i partnerships, file Application for Registration as Foreign Limited Liability Partnership By general partners

Management

Entirely in hands of owner

By general partners

Corporation's board of directors

Same as regular corporation

Membermanaged, or managermanaged

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Sole Proprietorship Life Will terminate with death or disability of owner

Partnership

Corporation

Sub-S Corporation Same as regular corporation

Limited Liability Partnership

Limited Liability Company

Generally for a specific, agreedupon term. Partnership may be terminated by death, withdrawal, insolvency, or legal disability of a general partner

Unlimited, unless by state law or charter

Generally for a May be for a specific, agreed- specific agreedupon term. upon time, or at Partnership may will be terminated by death, withdrawal, insolvency, or legal disability of a general partner Limited to amount of investment Limited to amount of investment, or as specified in Articles of Organization

Liability

Owner liability Unlimited for Shareholders' unlimited. general partners. liability limited Personal property General partners to their can be attached are jointly and investment in by creditors to severally liable for corporation stock settle business obligations of debts partnership. Limited partner's liability limited to amount invested Owner taxed on business profits whether or not distributed Partners taxed on share of partnership income whether or not distributed Corporation taxed on taxable income, whether or not distributed to shareholders

Same as regular corporation

Taxation

Shareholders Partners taxed on Members taxed taxed on share of on share of taxable partnership company income of income whether or income whether corporation, not distributed or not whether or not distributed distributed

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Sole Proprietorship Advantages Uncomplicated -ease of formation Greater flexibility of action Singleness of control Economy of operation

Partnership

Corporation

Sub-S Corporation Legal entity separate from individuals Limited personal liability Continuity of existence Continuity of management Readily transferable interests Possible separation of ownership and management Net operating loss deductible by shareholders

Limited Liability Partnership Division of responsibilities Ease of formation

Limited Liability Company Legal entity separate from individuals Limited personal liability Continuity of existence Continuity of management Easier to raise capital Incentive to key employees Readily transferable interests Possible separation of ownership and management

Division of responsibilities Ease of formation Greater flexibility of action Increased sources of capital

Legal entity separate from individuals Limited personal liability Continuity of existence Continuity of management Easier to raise capital Incentive to key employees Readily transferable interests Possible separation of ownership and managemen

Limited personal liability Greater flexibility of action Increased sources of capital Incentive to key employees Tax advantage by avoiding corporate income tax

Incentive to key Tax advantage by employees avoiding corporate income Tax advantage by tax avoiding corporate income tax Maximum centralized authority

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Sole Proprietorship Disadvantages Unlimited personal liability Legal life ends with owner's death Difficulty in raising capital Possible personnel difficulties Owner's salary cannot be treated as expense, hence, not tax deductible

Partnership

Corporation

Sub-S Corporation Only one class of stock outstanding Difficult, costly formation Subject to close government regulation Inflexibility of operations

Limited Liability Partnership Impermanence of existence Division of control/ authority Difficult to find compatible partners Difficult to raise additional capital Owners' salary/wage cannot be treated as expense, hence, not tax deductible

Limited Liability Company Difficult, costly formation Subject to close government regulation Scope limited by company charter Inflexibility of opera

Unlimited personal liability Impermanence of existence Division of control/ authority Difficult to find compatible partners Difficult to raise additional capital Owners' salary/wage cannot be treated as expense, hence, not tax deductible

Difficult, costly formation Subject to close government regulation Scope limited by corporate charter Inflexibility of operations Double taxation by paying both corporate and personal income taxes

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