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All business forms can be broken in two categories: unincorporated entities and incorporated entities. Under these two categories are various other forms.

Unincorporated Entities

Unincorporated entities consist of sole proprietorships, partnerships, and limited liability companies. A sole proprietorship is the simplest business form where one person owns the business and all the assets while personally responsible for its liabilities. A sole proprietorship is not a separate legal entity. Therefore, no legal formalities or filings are necessary to create this form of business.

There are three main types of partnerships: 1) general partnerships; 2) limited partnership; 3) limited liability partnership. General partnerships (GP) consist of co-owners, two or more people, conducting business for profit. Specific papers do not have to be filed to create a general partnership. In a GP, co-owners, or partners, are personally liable for all debts and judgments. Limited partnerships (LP) contain at least one general partner and one limited partner. The general partner has the same roles and responsibilities as in a general partnership. The limited partners hold limited rights and limited personal liability in the company. Limited liability partnerships (LLP) are similar to a general partnership; however, LLPs protects its owners with limited personal liability. To create a limited partnership or limited liability partnership, documents must be filed at the state level. The attorneys at Pratt Aycock can assist business owners file a certificate of limited partnership or a certificate of limited liability partnership with the state.

Limited Liability Company (LLC) is a hybrid business form that features qualities of both an incorporated and unincorporated entity. Similar to a corporation, a limited liability company is a separate legal entity that can do business under its own name and all owners have limited liability. Limited liability companies also benefit from a tax structure that is only available to unincorporated entities, a “pass-through” tax. To form an LLC, the attorneys at Pratt Aycock can assist you to file the articles of organization at the state level.

Incorporated Entities

The greatest benefit of incorporating provides personal liability protection for shareholders. However, in rare circumstances, protection may be lost. A corporation structure is simple. Shareholders own the business and elect a board to supervise the business. In a corporation, the entity is separate from its shareholders. The separation protects the shareholders from liability. For example, when corporate debt accumulates, the entity is only liable and the shareholders are not.

To file your business as a corporation, the attorneys of Pratt Aycock can assist you to file articles of incorporations with the state. When creating a corporation, you must decide your tax election, which will make you either a C-corporation or an S-corporation.

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