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Forming a Business Entity

Business formation is one of the vital first steps to a new company. The type of formation you choose will depend on several factors from number of employees, number of owner and the impact of taxation. 

Contact Long & Vernon today to discuss your options. 619-485-2900

 

Types Business Entities

Sole Proprietorship

A sole proprietorship is a business that is directly owned by a single individual. It is not incorporated, so that the sole owner is entitled to the entire net worth of the business, and is personally liable for its debts. The individual and the business are considered to be the same entity for tax purposes

Partnership

A partnership is a form of business organization in which owners have unlimited personal liability for the actions of the business, though this problem can be mitigated through the use of a limited liability partnership. The owners of a partnership have invested their own funds and time in the organization, and share proportionally in any profits earned by it. There may also be limited partners in the business, who contribute funds but do not take part in day-to-day operations. A limited partner is only liable for the amount of funds he or she invested in the entity; once those funds are paid out, the limited partner has no additional liability in relation to the activities of the partnership. If there are limited partners, there must also be a designated general partner that is an active manager of the business; this individual has essentially the same liabilities as a sole proprietor.

Corporation

A corporation is a legal entity  whose investors purchase shares of stock as evidence of their ownership in it. A corporation acts as a legal shield for its owners, so that they are generally not liable for the corporation's actions. A corporation pays all types of taxes, including income taxes, payroll taxes, sales and use taxes, and property taxes.

Limited Liability Company

A limited liability company (LLC) combines the features of corporations and partnerships, which makes them an ideal entity for many businesses.