Business Benefits: • The shareholders of the company have limited liability, which means that the company is responsible for all liabilities incurred by the company. • Generally favorable training for investors. Incorporation: To form an LLC, you must pay a filing fee ($100 to $800) and have a by-law when the entity is formed. Company agreements are highly recommended, but not required by all states. Similar to a partnership agreement or a company`s bylaws, the LLC operating agreement establishes rules for the ownership and operation of businesses. A standard operating agreement includes: A definitive form of business is a limited liability company (LLC). The Canada Revenue Agency (CRA) continues to treat the LLC as a corporation rather than a partnership, resulting in traditional double taxation of Canadian investors. Canadians should be aware that U.S. limited liability companies can be dangerous to their (tax) health. The corporate form offers several advantages, including limited liability for shareholders, better access to financial resources, specialized management and continuity.

Another advantage of incorporation, beyond taxes, is the ability to transfer responsibility to the corporation and not to the individual. Inclusion can also increase credibility. Some large companies require contractors to be onboarded before they can be hired. Five years after starting their ice cream business, Ben Cohen and Jerry Greenfield evaluated the pros and cons of owning the business, and the “professionals” won. The main motivation was the need to raise funds to build a $2 million manufacturing plant. Not only did Ben and Jerry decide to go from a partnership to a public company, but they also decided to sell shares to the public (and thus become a public company). Their sale of shares to the public was somewhat unusual: Ben and Jerry wanted the community to own the company, so they didn`t offer the shares to anyone interested in buying a stock, but only to Vermont residents. Ben believed that “companies have a responsibility to give back to the community from which they get their support.” [4] He wanted the business to be owned by those who lined up at the gas station to buy cones. The stock was so popular that one in a hundred families in Vermont bought shares of the company.

[5] Finally, as the company continued to expand, the shares were sold nationally. A form of organization that can be limited to a single person or several other owners or shareholders. is a relatively new form of commercial property that is now permitted in all fifty states, although the laws of each state may be different. LLC is a mix of sole proprietorship and corporation: The owners of the LLC have limited liability and are taxed only once for the company. “How to Choose the Right Business Structure for Your Small Business,” National Federation of Independent Business, accessed February 3, 2012, www.nfib.com/tabid/56/?cmsid=49906. The LLC offers all the benefits of a partnership, but limits the liability of each investor to the amount of his investment (see Table 12.4 “Limited liability companies: a summary of the characteristics”). “LLCs were created to provide entrepreneurs with the liability protection that businesses enjoy without double taxation.” Limited Liability Company,” Entrepreneur.com 9 July 2007, accessed 3 February 2012, www.entrepreneur.com/article/24484. We have described the four most common corporate legal structures with considerations for each of the following, including taxes, liability, and formation of each. Ready? The cost of forming an LLC includes state filing fees and can range from $40 to $500, depending on the state you filed in.

For example, if you file an LLC in New York State, you will have to pay a $200 filing fee and a $9 filing fee over two years. In addition, you must file a biennial declaration with the New York Department of State. [Check out our step-by-step guide to forming an LLC]. The legal form of the business is one of the first decisions a small business owner has to make. Since this decision will have long-term implications, it is important to consult a lawyer and an accountant to make the right choice. Here are some factors that small business owners should consider before making their choice:Karen Collins, Exploring Business (Irvington, NY: Flat World Knowledge, 2009), 90; “Small Business Planner: Choose a Structure,” US Small Business Association, accessed February 3, 2012 archive.sba.gov/smallbusinessplanner/start/chooseastructure/index.html. If you need external financing, such as from an investor, venture capitalist, or bank, you may be better off starting a business. Firms find it easier to obtain external financing than sole proprietorships. There are two types of partnerships.

In the partnershipA partnership consisting of two or more owners who contribute the initial capital of the partnership and participate in the profits and losses., All partners are fully responsible and each partner can enter into contracts on behalf of the other partners. A business format that may have multiple general partners and multiple limited partners who are not liable indefinitely. has at least one general partner and one or more limited partners whose liability is limited to the money or assets invested in the corporation. Limited partnerships are typically found in professional businesses such as dentists, lawyers, and doctors, as well as oil and gas, film, and real estate companies. However, many medical and legal partnerships have shifted to other forms to limit personal liability. John M. Ivancevich and Thomas N. Duening, Business: Principles, Guidelines, and Practices (Mason, OH: Atomic Dog Publishing, 2007), 60; David L. Kurtz, Contemporary Business, 13th Edition Update (Hoboken, NJ: John Wiley & Sons, 2011), 163; William M.

Pride, Robert J. Hughes and Jack R. Kapoor, Business (Boston: Houghton Mifflin, 2008), 150. The two types of companies are C Corps and S Corps. The main difference between the two types of businesses is the tax treatment of both companies: you need professional legal advice to make this decision, but the first step is to learn the different structures, depending on your situation, long-term goals, and preferences.