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Business Formation
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Summary
Creating a new business involves several moving parts, including selecting and forming the type of entity best suited to the owner’s specific needs.
If you are thinking about starting a company, an experienced attorney can assess your goals and advise you on the type of legal entity you should form based on the vision you have for your company.A lawyer can also counsel you on the potential liability and taxation ramifications associated with each type of entity and file the necessary paperwork with the state department on your behalf. Get in touch with a Georgia business lawyer to begin planning the creation of your very own company.
Types of Legal Entities
When forming a business, there are many types of legal entities to choose from depending on the number of owners involved, the industry, and the type of management and control structure desired. Georgia law allows individuals to form various types of legal entities, such as:- Sole Proprietorships
- Limited Liability Companies (LLC)
- C Corporations
- S Corporations
- Professional Corporations
- General Partnerships (GP)
- Limited Partnerships (LP)
- Limited Liability Limited Partnerships (LLLP)
- Non-Profit Organizations (501(c)(3))
Key Factors to Consider when Choosing a Legal Entity
There are two important factors to consider when forming a company—personal and tax liability. Certain types of legal entities provide better tax advantages to owners, while others better insulate owners from being personally liable for any debts accrued by the business.Personal Liability
Although forming sole proprietorships and general partnerships could result in favorable tax treatment, they do not protect owners from being personally responsible for paying liabilities or debts owed by the business. What’s even worse, there are outdated laws on the books for general partnerships, where an owner can be held responsible for his or her business partner’s actions, even if he or she had nothing to do with those actions. Limited partnerships typically provide limited partners with protection from being responsible for the company’s debts and liabilities. The general partners, however, will still be personally liable for the business’ debts.
However, LLCs, C- and S-Corps are usually the best way to go, because they provide owners with the most protection from being personally liable for an organization’s debts and liabilities. Potential business owners should talk to an experienced business attorney about their business objectives before deciding which type of legal entity to form.
Tax Liability
Sole proprietorships, LLCs, S-Corps, general and limited partnerships are pass-through taxation entities, meaning the owners pay taxes and the companies do not. Specifically, taxable profits, losses or deductions realized by the business will be “passed through” to each member or owner to claim on their individual tax returns. Forming this type of entity often results in favorable tax breaks for business owners.
Other entities, such as C-Corp, are subject to double taxation, meaning the business pays taxes on profits, and the owners must also pay taxes on their tax returns for the profits or dividends they receive from the (already-taxed) C-Corp.
Business Formation Filing Requirements in Georgia
Other entities, such as C-Corp, are subject to double taxation, meaning the business pays taxes on profits, and the owners must also pay taxes on their tax returns for the profits or dividends they receive from the (already-taxed) C-Corp.
Business Formation Filing Requirements in Georgia
Under Georgia Law, legal documents must be drafted and filed with Georgia’s Secretary of State to create LLCs, corporations and limited partnerships. If owners fail to properly execute and file the documents necessary to establish a specific entity, they may not be able to enjoy the advantages associated with forming that legal entity. An attorney can help ensure owners properly establish their desired entity by drafting and filing the required documents on their behalf.
Consult a Georgia Business Attorney Today
If you are considering starting a company, an experienced business attorney can advise you on the type of entity to form, explain the benefits and consequences of creating a specific entity, and file the required legal paperwork on your behalf. You do not have to go through this process alone. Contact us today.
