When setting up a business, carefully think through the type of legal
designation you choose. Sole proprietorships, partnerships (general and
limited), corporations and limited liability companies have different legal
protection and different federal and state tax implications. It is
recommended that you consult with an attorney, certified accountant or
other qualified individuals to determine which legal entity you associate
with your business.
A sole proprietorship is usually owned and operated by one person. It is not
considered a legal entity. Rather, it is an extension of the person who owns
the business. The individual has sole ownership of assets and is also solely
liable for the debts of the business.
A general partnership is comprised of two
or more individuals who join to start a business. Each person has
proportional ownership of the business assets, proportional liability for
business debts and authority in running the business. A partnership
agreement can be created which details each partner’s rights and
responsibilities.
A limited partnership is made up of one or more general
partners and one or more limited partners. Limited partners contribute
capital and share in profits/losses. These limited partners take no part in
the running of the business and are not held liable for the organization’s
debts.
A corporation is an entity which must be approved by the state of Georgia
through the Office of the Secretary of State. A corporation must file federal,
state and local taxes on its operation. Corporations offer protection from
liability afforded to shareholders.
A limited liability company (LLC) is owned by two or more persons known
as members. It is a mixture of other forms of organizations which combines
the best features of partnerships and corporations. An LLC’s name must
be reserved and the articles of incorporation must be filed. An operating
agreement should be written to control the conduct of the business.
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