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Doing
business as (DBA) – Business name
used by a person or entity. You must
file a Certificate of Assumed Name in
the county in which the business is
located. While this will give you the
exclusive right to use that business
name is that county, it does not prevent
a competitor from registering that name
in a neighboring county. Personal
liability.
Sole
Proprietorship - Business consisting
of a single owner, not in a separately
recognized business form. A sole
proprietor is personally liable for the
debts of the business.
Partnership – Business consisting of
two or more owners. Each partner can
bind the partnership and each partner is
personally liable for the debts of the
business.
Corporation – Business formed by
filing Articles of Incorporation or
Articles of Organization (if an LLC).
The business name is registered and
protected throughout the state. The
corporation is recognized as a separate
legal entity and, except in rare
circumstances, the owners cannot be held
personally liable. A corporation can
sued or be sued in its own right. The
ownership of the business is established
by issuing shares of stock. Stock
shares have voting rights and
shareholders vote annually to elect a
Board of Directors. The Board oversees
the business. A corporation is taxed on
its profits. If the shareholders
received a distribution from profits
(“dividend”), they are also taxed.
Limited
Liability Company – Business formed
by filing Articles of Organization.
Owners are designed as “Members”. A
limited liability company has the
benefit of limited liability for its
owners and pass through taxation.
Profits as well as deductions (such as
depreciation) are divided among the
Members based upon their ownership
interest in the company. There are
fewer ongoing formalities to be
followed.
Choosing
the right entity depends on many
factors. How is the business to be run?
Financed? Will advantageous deductions
be available? Will the business need to
reinvest its funds to grow? I can help
you choose what entity works best for
your specific situation, draft the
documentation to formalize your
decision, and show you how to maintain
the necessary formalities to protect you
and your assets. |
