You have an excellent idea for a business and the seed capital to make it a reality. The next step is to identify the structure you will use to operate your company. Choosing one depends on the vision you have for the future. You may plan to be the only owner, or you may wish to build a company that trades on a U.S. stock exchange.
Because the correct company structure is not one-size-fits-all, it is important to discuss your outlook and goals with a Johns Creek business formation lawyer. At Sparks Law, a dedicated attorney could listen to your individual needs and help choose between a sole proprietorship, partnership, limited liability company, or corporation.
Sole proprietorships are the simplest form of business entities. They are owned by one person who does need to worry about tax structure, as income and losses are filed on the owner’s personal IRS return. There are no filing requirements with the Georgia Secretary of State, either.
However, a sole proprietor mingles income and is personally liable for debts and lawsuits filed against the business. The owner will have to file a trade name choice with the Fulton County Superior Court if the company’s name is not the name of the sole owner. Owners must also apply for appropriate licenses and permits, along with an Employer Identification Number (EIN) from the IRS if they pay wages to employees.
Partnerships include two or more owners who do not file formal documents with the Secretary of State, although licensing and permitting are required on the local level. Partners are also liable for the company’s losses and lawsuits. Business partners in Johns Creek should work with a local attorney when forming a company to draft a partnership agreement and avoid future misunderstandings.
Limited liability companies (LLCs) are the most popular structure for Georgia and U.S. businesses because they offer flexibility and protection to owners if the company is sued or racks up debt. This option allows owners to choose between several options for tax structures.
Owners, called members, can choose to be taxed like corporations, or using a pass-through method in which the LLC profits and losses are allocated to members to report on their personal taxes, much like a partnership. If an LLC chooses to be taxed like an S corporation, other tax advantages apply. A business formation lawyer could offer further advice on the benefits of this option for Johns Creek entrepreneurs. Additionally, LLC members receive a percentage ownership of the company, depending on their initial capital contribution.
An operating agreement governs the LLC and explains, among other issues:
LLCs choose and vet a name and also need a registered agent to accept legal correspondence and an EIN. A skilled attorney could help those forming an LLC in Johns Creek to file Articles of Organization with the Secretary of State, as well as required yearly filings.
Corporations are the most complex business structures. Although there are various reporting requirements, corporations also come with many advantages, depending on a founder’s goals. This is an ideal business structure for those who wish to go public. Raising capital through equity can also be beneficial for the company and its investors.
Once the founding shareholders choose a name, they must vet it through a search on the Georgia Corporations Division website to make sure no other corporation is using the name.
Other necessary steps toward chartering a corporation include:
An experienced local attorney could help with each of these processes when forming a corporation.
It is critical for your business to be supported by a legal foundation that allows it to grow and earn profits. The first thing step toward achieving this is to choose the right structure for your company.
At Sparks Law, our Johns Creek business formation lawyers are here to assist with your legal needs before and after you officially begin your business. Call us now for your initial consultation.