Choosing Ownership Structure for Your Startup

payfi- Breaking Down: Ownership Structure Business Formats .com Presents: A Sole Proprietorship is the simplest form of business that requires very little work to set up. SOLE PROPRIETOR S CORP C CORP LLC GENERAL PARTNERSHIP LIMITED PARTNERSHIP The most flexible form of biz, combin- ing protection of corporate form with the single tax of partnerships. It's easy to set up and can be managed by mem- bers and employees. An agreement between two or more people to share in the profits and losses of a business, which pass directly to owners so its taxed only once. Like a GP, but with an additional type of owner, the limited Refers to Subchapter S of the tax code, which allows an S partners, who are protected from liabilty but don't manage the business. A standard format Corporation to avoid double taxation. that earns and exists outside of its owners. LLC GP LP S Corp C Corp Ownership interests permitted unlimited two or more two or more up to unlimited 2+ 2+ 75 trusts or members partners partners individuals shareholders Longevity of the business entity may be fixed term or indefinite may be fixed term or indefinite indefinite existence beyond owners indefinite existence varies by state; may dissolve with owner beyond owners Personal Liability of owners for actions and obligations of the business limited BIZ BIZ BIZ BIZ partners general partners protected unprotected protected protected Governing Documents Liability for What? The governing documents define how the business will be run in any imaginable situation. It's very important to have well-crafted operating agreements (LLC), partnership agreements (GP/LP), or articles and bylaws (corporation) to prevent unnecessary conflict and ensure the validity of the business. A business is an extension of the people who own and operate it, but most don't want to risk their personal assets and investments in the course of business. BIZ Here are some questions these documents should address: * What share of income does each partner get? * How will you add investors or sell the biz? * What happens if an owner dies or divorces? * Which investors engage in management? * What happens when a partner wants to leave? Owners want protection from: * Debts & Judgements * Civil & Criminal Lawsuits * Insurance & Tax Claims Don't let choosing a business format slow you down... make the best decision you can and keep moving! Sponsored by: paySfem. payoff.com/blog Ewing Marion poyt. KAUFFMAN .com Fund your dreams O twitter.com/payoff f facebook.com/payoff Foundation