The type of entity under which you incorporate has enormous implications for a new business. Don Wilson CPA PC can explain the pertinent tax and legal issues and help you determine the best choice for your venture. Here is a brief rundown of several common forms of incorporation.
A corporation is a separate legal entity in which the owners or shareholders have no personal liability for its obligations. There are two types:
Limited Liability Partnership (LLP)
An LLP is comprised of two types of partners. General partners have management authority as well as personal liability for the firm’s obligations, while limited partners are simply cash investors with no management authority and liability for only the amount they have invested. An LLP is not a separate tax-paying entity and often is formed with a C or S corporation as a general partnership.
Limited Liability Company (LLC)
An LLC requires an organizational agreement similar to a partnership agreement and must file articles of organization with the Secretary of State. The owners or members are shielded from personal liability for the company’s obligations. An LLC may be taxed as a partnership, so its members must report income and deductions on their individual tax returns.