Are you interested in starting a business? Are you thinking about selling your existing business? Thomas Law Firm is here to help! Whether it is as simple as drafting a business agreement, reviewing previous contracts, or getting a business registered and incorporated with the Secretary of State, Thomas Law Firm is very experienced in helping businesses become more prepared and ready to take on the market.
Business Entity Formation Documents, Partnership Agreements, Investor Agreements
Thomas Law Firm is here to help with the start up of your business. We can do everything from the drafting of an operating agreement, to registering your company with the Secretary of State, to everything in between. We will take care of all the hard work to make the formation, startup and operation of your business a seamless success!
Corporations, LLCs, Partnerships & More – Which One is Right for You?
- A partnership is a business in which there are two or more owners, although they do not have to own the same portion of the business. Partners are taxed individually in accordance to their portion of the income, however the partnership itself is not taxed as a whole. However, this also means that each partner is personally liable for their percentage of the company. There are different types of possible partnerships such as general partnerships, limited partnerships, and limited liability partnerships.
- General Partnership (GP)
- In a general partnership, two or more individuals share the management of and personal responsibilities for a business. This is the simplest structure you can choose when starting a business with one or more partners.
- The requirements for creating a general partnership are generally straightforward.
- There’s no need to file before creating a general partnership because a general partnership is not a statutory business organization.
- To form a general partnership, you establish an agreement with your one or more partners. The agreement can be oral, but it is heavily advised to have it written and signed by all partners to help avoid conflicts down the road. This agreement should establish each partner’s responsibilities, duties, and rights.
- Essentially anyone can be a partner. A partner can be an individual, or a partnership, limited liability company, corporation, or trust.
- Limited Partnership (LP)
- The limited partnership is made up of two types of partners: general partners and limited partners. This business structure can be seen as a cross between a general partnership and a corporation, where limited liability protection exists for some partners.
- In the case of a limited partnership –
- At least one partner must be a general partner with unlimited liability.
- At least one partner must be a limited partner. This person’s liability is typically limited to the amount of his or her investment.
- This means that in an LP, the general partners are personally responsible for the obligations of the business, leaving them open to greater liability should anything happen to the business. However, general partners theoretically wield the most control in how the business is run.
- Anyone holding a limited partner role is more like a passive shareholder of a corporation—making investments to support business objectives but not being directly involved in the management decisions.
- As such, this type of business structure is often only used in single, limited-term situations—such as film and real estate projects—as well as in family estate planning.
- When creating a limited partnership, there are a few requirements to understand:
- This business structure is organized under state law. Various documents—including a certificate of limited partnership (or similarly named document) — must be filed with the state. Any state can be chosen as the formation state.
- LPs are required to have a partnership agreement and must publicly disclose their status by having the LP designation in the company name.
- Limited Liability Partnership (LLP)
- A limited liability partnership is similar to a limited liability company (LLC) in that all partners are granted limited liability protection. However, in some states the partners in an LLP get less liability protection than in an LLC.
- LLP requirements vary from state to state.
- In some states, the option for an LLP is limited to certain professional services—usually ones that require a state license—such as accountants, attorneys, doctors, among others.
- In a similar fashion, an LLP may be one of the few or only option for certain professions when forming a group practice.
- Other states allow an LLP to be used for any business purpose.
- When comparing the differences between LLCs and partnerships, note that the owners of an LLP, limited partnership or general partnership are called partners. LLC owners are called members.
- An LLP must have an entity indicator in its name such as Limited Liability Partnership, LLP or L.L.P. This is also the case with an LLC, limited partnership, or any other statutory business entity where some or all owners have liability protection.
- Here are some of the requirements for creating a limited liability partnership. (Again, please keep in mind that laws vary from state to state.)
- Formation documents are required when registering a business as an LLP. This must be filed with the appropriate state agency, along with the appropriate filing fees. One of the required documents is sometimes called a statement of qualification or a certificate of limited liability partnership.
- Any state can be chosen as the formation state (if you meet the state criteria for an LLP).
- Some states require one or more legal notices of the new LLP published in one or more local newspapers.
- The business must have two or more partners in order to form an LLP business structure.
- A converting general partnership retains its original partnership agreement. The LLP is governed by state law on general partnerships, as well as the specific provisions of the partnership law governing LLPs.
- Corporation: A corporation can have one or more owners (called shareholders) and is managed by a board of directors. There is a layer of liability protection, as the corporation itself holds liability instead of each owner individually. However, in a corporation, income is taxed at the corporate level and for the shareholders personally, a principle known as double taxation. A corporation has the most formalities to follow.
- LLC: An LLC (or limited liability corporation) is a hybrid between a corporation and a partnership. It enjoys the limited liability of a corporation while having the benefit of being taxed as a partnership, known as pass-through taxation.
Business Plan Consultation & Risk Analysis
We are very knowledgeable about different types of business and what the best routes could be in regards to maximizing your benefits and success. We would love to help you understand potential benefits and risks so that you can choose the best path for your specific business’s objectives and goals.
We also have experience in advising and assisting with the following areas:
- Strategic Partnerships & Investors
- Seed and Series Financing, Convertible Notes, SAFEs (Simple Agreement for Future Equity), Stock Purchase Agreements, Preferred Stock Investment Agreements, and Bridge Loans and other Debt Financing
- Expansion & Franchising
- USPTO Trademark Applications and Trademark Maintenance
- Succession Plans & Selling a Business
- Corporate Governance and Corporate Secretary Duties
- Stock Option Plans and Employee Equity Compensation Plans
- Unanimous Written Consents and Board Meeting Minutes
- Tax Planning for Business Owners
- Governmental Regulatory Compliance, including with the United States Committee on Foreign Investment (CFIUS)
- Negotiating and Drafting All Business Contracts, including Employment Contracts, Independent Contractor & Consultant Agreements, Service Agreements, Sale Contracts, and Non-Disclosure Agreements (NDAs)
- Debt Collection; Creditor/Debtor Issues