Having your own business can be the most satisfying move in anybody’s career, but while it is a good move, a business with the wrong partners can be horrifying and traumatic. So, if you’re planning on jumping on that business venture, you’ve come to the right place. We’ve compiled a list of everything you should know about business partnerships so it can further benefit your business, future, and career:
BUSINESS TYPES
First off, let us discuss business types. In California, there are six most common kinds of business models—corporation, limited liability company, limited partnership, general partnership, limited liability partnership, and sole proprietorship.
For every type of business, taxation and legal responsibilities vary. That is why it is best to hear out the advice of a lawyer before deciding to register your business.
A.Corporation
- Let’s talk about a corporation. This type of business separates the business entity and the individuals running the business. This means that whatever the business is doing, the owners cannot be directly liable to it. One important thing to note if you plan on starting a corporation is that this business type has its own sets of taxation and liability rules. For example, the sales of shares or stocks in the company are taxed accordingly.
B.Limited Liability Company
- Next is the Limited Liability Company. While there are similarities, the entities are taxed differently. Future business owners under this arrangement should declare their articles of organization to the state government they operating in. The rules for LLC may vary depending on which state the business operates. We at Radio Law Talk will tackle these taxation issues in more detail so do not forget to always tune in.
C.Limited Liability Partnership
- In the case of Limited Liability Partnership, the owners are segmented in terms of responsibilities. This means that partners in charge of operations cannot be blamed by the partners in charge of sales when the company finances are being drained. The owners liable to explain this problem are the partners in charge of finance and audit, unless the cause of losses is attributed to the mishandled operation activities. Generally speaking, in an LLP set-up, each partner is not responsible for the negligence or misconduct of the other partners. The benefits of this business type lies on the fact that your other assets are protected should anything fail because the law will only go after the assets that you brought into the partnership. If you need more details on this arrangement, tune in or give us a call and we can talk about your preferences and your preferred business model.
D.General Partnership
- Now we will tackle the General Partnership. Unlike the Limited Liability Partnership, this arrangement gives equal responsibility to the partners in the businesses. This means that if there are seven partners in the company and it borrowed a certain amount of capital, then all partners can be sued if the company fails to deliver its obligations to the creditors. On the bright side, this also means that profit is equally divided among the partners, no matter how small or big the partner’s participation in the company operations are.
E.Limited Liability Partnership
- There is also a business type called Limited Liability Partnership. In this agreement, there are two or more partners. The general partner is the person that manages the business hands-on. This person has unlimited personal liability for the debts and obligations of the business. He is joined by a limited partner, who has limited legal responsibility, however cannot dip his fingers in the operations.
F.Sole Proprietorship
- Last but not the least, and actually the most common among start-ups, is the Sole Proprietorship. They say never do business with your friends, right?. That is probably the reason this business type is now in existence and one of the most thriving more than ever. Under this model, an individual is allowed to own and operate a business. This means that the owner manages, benefits from all profits, and is expected to deliver all the legal obligations of the business to the clients and the regulators, including taxes and permits.Putting up a business can be a tough decision, that is why getting the right partners and deciding on the right business model is an important step on this endeavor. We at Radio Law Talk would like to lighten these burdens somehow by giving free counsel on-air, so you can save on consultation hours with your lawyers should you decided to register your business.It is also a vital area to know how these business models are affected by taxation and state rules in your area of operation. For example, there are some states in the United States that do not offer or do not operate business under the LLP arrangement. You have to check your state laws to determine what is allowed and what models they refuse to conduct in their region.
So, tune-in to Radio Law Talk and feel free to call us and our roster of lawyers. if you need more guidance regarding your future business. A business should always start on the right foot, legally, to ensure the sustainability of its operations and to protect the business owners, the company, and its assets.
*We are not dispensing legal advice and this is not a comprehensive overview of the law and your circumstance and the state or county you live may warrant different applicable law. Seek legal counsel.
SOURCES:
Beattie, Andrew. “Limited Liability Partnership (LLP): The Basics.” Investopedia, Investopedia, 22 May 2018, www.investopedia.com/articles/investing/090214/limited-liability-partnership-llp-basics.asp.
“Starting a Business – Entity Types.” Name Availability | California Secretary of State, www.sos.ca.gov/business-programs/business-entities/starting-business/types/.
Cameron, Holly. “General Partnership Laws & Regulations.” LegalZoom Legal Info, 21 Nov. 2017, info.legalzoom.com/general-partnership-laws-regulations-20888.html.
“Limited Liability Partnership.” Wikipedia, Wikimedia Foundation, 8 Jan. 2019, en.wikipedia.org/wiki/Limited_liability_partnership.
“Limited Partnership.” Why & How To Incorporate in Delaware or Form DE LLC, www.incorporate.com/starting-a-business/limited-partnership.
