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Common Types of Business Legal Structures

By Edited Feb 10, 2014 0 0

Businesses are entities that serve the general public, and almost everyone can benefit from them. In return, these entities are able to earn for the services rendered. Businesses are a necessity, not only to the economic aspect of the country, but also to its citizens. Though starting a business is a sure way to earn, doing so is easier said than done. Not only will it be expensive, it also entails legal issues that may become an obstacle for the businessman if not sorted out early on. Plus, you'll also have to consider what type of business structure you'd want to adapt:

  • Sole proprietorship: The simplest business legal structure, sole proprietorship, from the name itself, means that there is one person owning the business. However, this type may also be the riskiest financial-wise since only one person is responsible for the expenses, debts, and obligations of the business.
  • General partnership: Partnership is an alliance to start a business between two or more people. Each of them has to contribute money, property, labor, and skill, and any profits and losses "pass through" the partners. Partnerships can be formed informally, but it's best to have a written agreement specifying the partnership's terms.
  • Corporations: The most common form of business structure, corporations are a "legal entity" that is separate from its owners under the law. Because of this, corporations have limited liability and can even have its own bank account and assets. Corporations also have a separate centralized management different from the actual owners. Prospective shareholders exchange money or property for the capital stock.
  • Limited liability companies: LLCs are generally not considered as corporations, but they have some of the protection benefits that a corporation has, one of which is that LLC members have limited personal liability for the debts and actions of the company. Other features are similar to that of a partnership. States have different requirements and federal tax regulations for LLCs; for example, the number of members is not limited, and that individuals, corporations, other LLCs and foreign entities may be a member. Some LLCs may even have just one owner.

Whatever type of business structure you choose to adapt for your own company in the future, a Los Angeles expert business and corporate law attorney will be able to help your company be recognized by the law. A business law attorney can also help sort out any legal issues that may arise throughout the course of your company's existence.


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