We regularly provide basic organizational services for our clients, including business corporations, non-profit corporations, limited liability companies, limited partnerships, other limited liability entities, general partnerships, and sole proprietorships. All clients beginning new businesses need to know the differences between and among these entities and what is the best form of business for them. Setting up the correct form of organization can protect your personal assets from (or expose them to) some creditors' claims and provide favorable tax treatment in some situations.
Corporations: There are many types of corporations. Tax-wise a common choice is between "C" corporations and "Subchapter-S" corporations. A C-corporation is treated as a separate taxable entity for tax purposes, so that the corporation is taxed separately from its individual owners for income tax purposes. A Subchapter-S corporation is a corporation for which profits and losses of the corporation are passed through to the company's owners, to be reported on their individual income tax returns. Profits and losses must be passed through to the company's owners based upon the amount of stock that they own. There are some limitations on how a Subchapter-S corporation can be set up. For example, it can only have individual shareholders, i.e. no owners who are other corporations or limited liability companies. We often recommend Subchapter-S corporations for companies who will have employees, or whose owners may one day want to sell the business as a going concern (stock sale versus asset sale). "C" corporations are more appropriate for larger, more profitable companies, and warrant the advice of independent tax professionals.
Corporations are owned by Shareholders, who elect Directors, who appoint Officers, who run the day-to-day business of the company. They are governed by Bylaws, and sometimes by Shareholders Agreements.
Our flat rate for establishing most business corporations is $650 plus expenses. Shareholders Agreements are charged separately. We reserve the right to quote different fees, depending on the complexity of your business.
Limited Liability Companies: More commonly these days, a limited liability company form of doing business is chosen by small business owners. LLC's generally offer greater flexibility in terms of documentation and management. LLC's are owned by Members, who elect or appoint Managers, who run the day-to-day business of the company. They are governed by an Operating Agreement.
LLC's are often perfect for most small businesses, especially those whose life expectancy is tied to that of the individual owners (versus having the need to continue in existence after the initial owners are gone). They are particularly useful for more passive investment businesses, such as real estate investments and the like.
Tax-wise, LLC's are also "flow-through" entities, with profits and losses reportable on the owners' individual income tax returns. Different tax accounting rules may apply for single-member versus multi-member LLC's.
Our flat rate for establishing most limited liability companies is $700 plus expenses. Tailored Operating Agreements may be charged separately. We reserve the right to quote different fees, depending on the complexity of your business.
Both LLC's and corporations generally offer some limitations against personal liabilities of the company's owners. If your company maintains proper organizational formalities (holds meetings, elects management, etc., as required by the Bylaws or Operating Agreement), contracts entered into only the organizational name should be binding upon, and produce liabilities for, only the company. Owners' personal assets are generally shielded. They can also offer greater protection against vicarious liability, e.g. losses and damages arising from the misconduct of employees, so long as the owners did not participate in the misconduct.
That said, no organization is an absolute shield against personal liability. Creative lawyers can often find ways to "pierce the organizational veil," especially if the owners do not take proper steps to maintain documents and a separate organizational identity. If you personally particpate in conduct that harms someone else, you can usually be held individually liable for that conduct, regardless of whether you work for a "shielded" entity.
There are many different types of limited liability entities, such as limited liablity partnerships (LLP's), limited partnerships (LP's), limited liability limited partnerships (LLLP's), etc. Let us help you choose the organizational form that is right for your business.
Partnerships and Sole Proprietorships: We also often help our clients set up simpler forms of business, such as sole proprietorships and partnerships. We create many real estate partnerships for people who will co-own non-investment real estate together. Care should be taken, however, before establishing these types of non-shielded entities. For example, if you form a general partnership with someone else, you can be held personally liable for debts incurred by your partner in furtherance of the partnership's business.
Our fees for partnerships and sole proprietorships vary depending on the services requested.
Other Business Establishment Issues: Our goal is never simply to set up organizational "shells" for clients, and then let them figure out for themselves how to operate the new company they have created. We help clients set up business contracts, including employment contracts, handle employee, customer and client-related problems if they arise, and, more importantly, help to avoid business disputes by proper planning. We enjoy helping and watching our clients' businesses grow and thrive.
All of that said, we cannot provide all services which a business might need. So, we encourage our clients to establish relationships with qualified accountants and financial planners. If an area of the law required by a client is beyond our realm of expertise, we will find you someone who can help. We interface daily with a broadly variety of legal, financial, and business professionals.
Also, it is important for all clients to note that, even if we can help you with your organizational needs, the client needs to follow applicable rules concerning properly maintaining organizational existence. If you set up a corporation, for example, but do not pay annual registration fees, hold regular meetings, create minutes of meetings, maintain separate accounts, etc., the organization which you have paid to establish, may provide no protection for you. This was reiterated in a recent Georgia Court of Appeals case, Christopher v. Sinyard. So, once we establish an organization for a client, we strive to maintain an ongoing relationship with the client to make sure that your company is not only properly established, but continues to operate within the bounds of the law.
Click here for a brochure from the State Bar of Georgia about Organizations.