3 Business Formation & Incorporation THE ANATOMY OF AN ENTITYDifferent Types of EntitiesStructurePros & ConsRegistration
4 Business Formation & Incorporation Different Types of EntitiesSole ProprietorshipPartnershipCorporationLimited Liability Company (LLC)Limited Liability Partnership (LLP)
5 SOLE PROPRIETORSHIPA business in which one person owns all the assets, owes all the liabilities and operates in his or her personal capacity.
6 SOLE PROPRIETORSHIP PROS CONS Full Management Authority “You are your own Boss.”Limited legal expenseMinimal Formalities and Regulatory and Reporting RequirementsUnlimited Liability: Owner is solely responsible for all debts and obligationsNo diversity in managementLimited ability to Raise Capital
7 PARTNERSHIPA voluntary association of two or more persons who jointly owns and carry on a business for profit. Under the Uniform Partnership Act, a partnership is presumed to exist if the persons agree to share proportionally the business’s profits or losses.
8 PARTNERSHIPPROSCONSAll partners are entitled to manage the partnership equallyMinimal formalities and regulatory and reporting requirementsLow cost of OrganizationUnlimited LiabilityPartnership can cause problems when partners disagree on fundamental issuesLimited ability to raise capital
9 CORPORATIONAn entity having authority under law to act as a single person distinct from the shareholders who own it and having rights to issue stock and exit indefinitely.
10 CORPORATION PROS CONS Limited Liability for Shareholders Business continuityAbility to raise capitalCentralized management- Shareholders- Board of Directors- Officers/ ManagersIncreased legal expensesCorporate Formalities and Reporting Requirements:- Annual Report- Annual Corporate MinutesDouble Taxation- Corporate income- Shareholders: Pay taxes on income & dividendsDouble Taxation: Corporation is responsible for tax on corporate income. Shareholders responsible for income tax on income and dividends received.
11 LIMITED LIABILITY COMPANY (LLC) A company – statutorily authorized in certain states – that is characterized by limited liability, management by members or managers, and limitations on ownership transfer.
12 LIMITED LIABILITY COMPANY (LLC) PROSCONSLimited Liability for all ownersUnrestrictive ownershipAbility to raise capital for businessBeneficial tax treatmentFlexibility of managementHigher Legal ExpensesLimited Transferability of OwnershipPossibility of Piercing the LLC VeilStrict Formalities and Reporting Requirements- Articles of Organization- Annual Reports
13 LIMITED LIABILITY PARTNERSHIP (LLP) A partnership in which a partner is not liable for a negligent act committed by another partner or by an employee not under the partner’s supervision.
14 LIMITED LIABILITY PARTNERSHIP (LLP) PROSCONSLimited LiabilityBusiness ContinuityDiversified Capital ResourcesOperating AgreementGeneral PartnerHigher Legal and Organizational ExpensesStrict Formalities and Regulatory and Reporting Requirements
15 Registration & Recording Secretary of State- Forms- FeesRecorder of Deed Office
16 How to Decide Which Entity is Best for You Conference with your Accountant & AttorneyDiscuss:- Present- Near Future- FutureCost Effective
17 Thank You for Joining Us. To Be Continued…Thank You for Joining Us.Law Offices of Burton A. BrownBurton A. Brow, a HACIA memberStephen SpiegelPatty RodriguezMaria Hernandez