Business Structures – Ardent Law Group, PC

Sole Proprietorships

A sole proprietorship is a business with one owner, the sole proprietor, that is not organized or formed as a legal entity under any state or federal law. There are some special exceptions where a husband and wife may be file to be considered joint owners in a sole proprietorship.

What are the liabilities of sole proprietors?

The sole proprietor is personally liable for financial debts of the business and any claims brought against the business to the full extent of his personal assets.

How are they taxed?

The IRS sees the sole proprietor and the business as the same for income tax purposes. The sole proprietor pays income taxes on the profits of the business as though it were personal individual income.

Partnerships

A partnership is a business entity with two or more participants. It is normally started by agreement, written or oral, between the participants. After an agreement is made among the partners as to the role and obligation of each partner, the partnership may undertake a project or business venture.

What are the liabilities in a partnership?

Each partner may be risking 100% of his/her personal assets in the operation of the partnership and depending on the nature of the business of the partnership, there may be tax issues that impact the individual’s personal tax obligation.

What happens when one partner wants to leave, is incapacitated, or dies?

The answer depends on agreement among the partners. If there is no prior agreement, the assets of the partnership are normally distributed among the partners and the estate of the deceased or departed partner on a pro rata basis in an amount equal to the partner’s share. Another option is for the partnership to continue with the departed partner having received his pro rata share of the assets as determined at the time of dissolution.

Corporations

A sole proprietorship is a business with one owner, the sole proprietor, that is not organized or formed as a legal entity under any state or federal law. There are some special exceptions where a husband and wife may be file to be considered joint owners in a sole proprietorship.

What are the liabilities of sole proprietors?

The sole proprietor is personally liable for financial debts of the business and any claims brought against the business to the full extent of his personal assets.

How are they taxed?

The IRS sees the sole proprietor and the business as the same for income tax purposes. The sole proprietor pays income taxes on the profits of the business as though it were personal individual income.

Limited Liability Corporations (LLCs)

A sole proprietorship is a business with one owner, the sole proprietor, that is not organized or formed as a legal entity under any state or federal law. There are some special exceptions where a husband and wife may be file to be considered joint owners in a sole proprietorship.

What are the liabilities of sole proprietors?

The sole proprietor is personally liable for financial debts of the business and any claims brought against the business to the full extent of his personal assets.

How are they taxed?

The IRS sees the sole proprietor and the business as the same for income tax purposes. The sole proprietor pays income taxes on the profits of the business as though it were personal individual income.

Non-Profit Corporations and Charitable Organizations

A sole proprietorship is a business with one owner, the sole proprietor, that is not organized or formed as a legal entity under any state or federal law. There are some special exceptions where a husband and wife may be file to be considered joint owners in a sole proprietorship.

What are the liabilities of sole proprietors?

The sole proprietor is personally liable for financial debts of the business and any claims brought against the business to the full extent of his personal assets.

How are they taxed?

The IRS sees the sole proprietor and the business as the same for income tax purposes. The sole proprietor pays income taxes on the profits of the business as though it were personal individual income.