Another exception to the general rule that no filing is required occurs when the sole holder carries on business under a name other than his real name. For example, if John Jones operates as ABC CONSULTING, he must make a statement that ABC CONSULTING is in fact John Jones carrying on business under a different name. This name is known in various states as an assumed name, fictitious or commercial. State law determines how and when adopted/fictitious/business names must be trademarked. When a person decides to start a business, one of the first things they need to do is decide under what kind of business structure they should operate. There are six main types of business organizations you can choose from. They are: The main advantage of incorporation is the limited liability to which shareholders are exposed: they are not responsible for the obligations of the company and cannot lose more than the amount they have personally invested in the company. Limited liability would have been a big plus for the unfortunate person whose business partner burned his cleaners dry. If they had been established, the company would have been liable for the debts incurred by the fire. If the company did not have enough money to pay the debt, individual shareholders would not have been obliged to pay anything. They would have lost all the money they had invested in the business, but nothing more.
A corporation is a separate legal entity that is independent of the people who own it. According to Carter Bishop, a professor at Suffolk University School of Law who helped draft the LLC`s uniform laws for several states, “there`s virtually no reason for a small business to file as a business unless the owners plan to go public in the near future.” Annalyn Censky, “Business Structures 101,” CNN Money, August 4, 2008, accessed February 3, 2012, cnnmon.ie/MDaxXN. Ultimately, the LLC business structure is the best choice for most small businesses. Homeowners have the greatest flexibility, and there is a liability shield that protects all owners. Annalyn Censky, “Business Structures 101,” CNN Money, August 4, 2008, accessed February 3, 2012, cnnmon.ie/MDaxXN. The process of starting a business varies depending on the state you do business in and the state you live in. In most cases, you will need to file a regulation with the state and then issue shares to the company`s shareholders. Shareholders elect the Board of Directors at an annual meeting. Corporate rights stagnated somewhat in early U.S.
history, inheriting the rights they had from British common law, according to the History website. It wasn`t until the 14th Amendment to the Constitution was ratified in 1868 that things began to begin. Three years after the Civil War, the 14th Amendment was drafted to guarantee freed slaves citizenship rights, due process, and equal protection of the law for anyone born or naturalized in the United States. A limited partnership cannot be established simply by doing business. A limited partnership is a legal form of business organization. It can only be formed in accordance with the legal requirements of the state. An LLC may be wholly owned or have multiple owners. The owners of an LLC are called members. Members of an LLC, such as limited partners or shareholders, are not responsible for the company`s debts due to their status as owners. Members also have the right to manage the business and affairs of the Corporation and do not lose their limited liability status by acting as directors. Members may also choose to have the LLC managed by one or more managers if they do not want to manage it themselves.
In addition to the three commonly adopted forms of business organization – sole proprietorships, partnerships, and ordinary businesses – some entrepreneurs choose other forms of organization to meet their particular needs. We will look at two of these options: A sole proprietorship is the least complex form of business. Incorporation is simple and inexpensive, as the sole proprietor only has to start with the commercial activity. Unlike other forms of business organizations, such as corporations or LLCs, the sole proprietorship does not have to register as a business entity with the state office before doing business. In 1977, Wyoming became the first state to allow companies to operate as limited liability companies. Twenty years later, in 1997, Hawaii was the last state to accept the new form of organization. Since then, the limited liability company has grown in popularity. Its rapid growth has been spurred in part by changes to state regulations that allow a limited liability company to have only one member. The trend towards LLCs can be seen by reading the names of companies on the side of trucks or on storefronts in your city. It`s common to see names like Jim Evans Tree Care, LLC and For-Cats-Only Veterinary Clinic, LLC. However, LLCs are not limited to small businesses. Companies like Crayola, Domino`s Pizza, Ritz-Carlton Hotel Company, and iSold It (which helps people sell their unwanted items on eBay) operate in the limited organizational form.
This document is taken from Chapter 1 of CT Corporation`s Handbook: A Comprehensive Look at the Corporation for Business Owners and Legal Professionals. The manual also contains information on the nature, training, finances, internal governance, structural changes and dissolution of enterprises. For many people, however, sole proprietorship is not suitable. The flip side of complete control is providing all the different talents that may be needed for the company`s success. And when you`re gone, the company dissolves. You also have to rely on your own funds for financing: in fact, you are the company and all the money borrowed from the company is loaned to you personally. Most importantly, the sole proprietor has unlimited liability for business losses. The principle of unlimited personal liability means that if the business goes into debt or suffers a loss (for example, due to an injury to someone), the owner is personally liable.
As a sole proprietor, you risk your personal assets (your bank account, your car, maybe even your home) for your business. You can reduce your risk with insurance, but your liability risk can still be significant. Since Ben and Jerry decided to start their ice cream business together (and therefore the business wasn`t owned by one person), they couldn`t start their business as a sole proprietorship. Like sole proprietorships and partnerships, businesses have both positive and negative aspects. In sole proprietorships and partnerships, for example, the people who own and operate a business are the same. However, company executives do not necessarily own shares and shareholders do not necessarily work for the company. This can be problematic if the objectives of the two groups differ considerably. To maintain this distance, you don`t have to do things that blur the line between you and your business, such as using your personal checking account to pay supplier bills. If your company is no longer able to pay its invoices, the supplier may complain to you personally because you have personally paid the company`s bills in the past.
How do you want a legal form that offers the attractive characteristics of the three common forms of organization (company, sole proprietorship and partnership) and avoids the unattractive characteristics of these three forms of organization? The Limited Liability Company (LLC) does just that. This form offers entrepreneurs limited liability (a major advantage of companies) and no “double taxation” (a significant advantage of sole proprietorships and partnerships).