Building a Strong Foundation Through Purposeful Entity Formation
When forming a new business, you need to decide what entity type it will be. Choosing wisely can be critical to getting your business off to a strong start.
At Daudi & Kroll, P.C., we are here to help you with this decision and the other major choices related to launching a new business endeavor. Based in Okemos and Canton, our entity formation attorneys provide Michigan entrepreneurs with personalized guidance and support. Let us help you start your business on a firm foundation.
The Basics of Partnerships
A partnership is an entity option for businesses with multiple owners (called partners). A partnership agreement can govern its operations. The individual partners are taxed, not the business itself.
The most basic kind of partnership is a general partnership. In this arrangement, all partners are liable for the business’s actions.
There can also be limited partnerships. In this structure, there are two types of partners: general and limited. General partners have the same responsibilities and liabilities as a general partnership. Limited partners, on the other hand, only contribute financially and enjoy limited liability.
Understanding Incorporation
A more complex entity choice is a corporation. The company’s articles of incorporation and bylaws govern it. It has a relatively strict management structure. Its owners (called shareholders) do not have liability for the business’s actions.
How a corporation is taxed depends on its type. In an S corporation, the individual shareholders are taxed, but the business isn’t. In a C corporation, the business is directly taxed, as are dividends paid to shareholders.
What to Know About LLCs
A limited liability company is a hybrid model that mixes elements of corporations and less complex entity types. Articles of organization and operating agreements can govern operations. Owners (often called members) have liability protection. An LLC has more flexibility in its management structure than a corporation. An LLC’s members are taxed individually, while the company as a whole is not.
Helping You Choose The Right Business Entity For Your Goals
The right one depends on your goals, liabilities and management preferences. Our firm helps clients create and maintain a wide range of business entities, including:
- Sole proprietorship: A sole proprietorship is the simplest structure, ideal for single-owner businesses. It requires minimal formalities, with the owner reporting business income on their personal tax return. However, the owner faces unlimited liability, meaning personal assets are at risk for business debts. Our team can assist with necessary registrations and guide you on how to protect your interests.
- Partnerships: Partnerships suit businesses with multiple owners. General partnerships involve shared liability among partners, while limited partnerships include general partners with full liability and limited partners with liability capped at their investment. A partnership agreement is crucial to define roles and responsibilities.
- Corporations: Corporations offer robust liability protection for shareholders and a structured management system. C corporations face double taxation–once at the business level and again on shareholder dividends. S corporations, however, pass income directly to shareholders, avoiding corporate-level taxes but with stricter eligibility rules. Our attorneys handle articles of incorporation, bylaws and compliance to set your corporation up for success.
- Professional Limited Liability Company (PLLC): A PLLC is designed for licensed professionals, such as doctors or lawyers, combining LLC flexibility with liability protection. Members are shielded from business debts but remain liable for professional malpractice. We assist with filing requirements and crafting operating agreements specific to your profession.
- Nonprofit entities: Nonprofits focus on public or community benefit rather than profit. They can apply for tax-exempt status, often as a 501(c)(3) organization, through the IRS. Our team navigates the complexities of forming nonprofits, helping ensure compliance with state and federal regulations.
- Foreign LLC: For U.S.-based businesses expanding internationally, a foreign LLC allows operation in another state or country while maintaining your domestic structure. We handle registrations and compliance to support your global ambitions.
Rely on us to streamline entity formation. While some steps may seem manageable alone, our guidance helps ensure accuracy and compliance, saving you time and risk.
Guiding You Through Entity Formation
Our team is ready to support you at every step of entity formation. We can:
- Help you understand your entity options
- Help you determine the right entity type for your business
- Guide you through registration
- Help you create governing documents
- Assist with all other aspects of getting your chosen entity type in place
Our lawyers can also help you navigate other commercial law issues connected to starting your business.
Start Your Business with Confidence
Turn to our knowledgeable team for trusted answers and guidance on entity formation.
Connect with us today via email. You may also reach us by phone at 517-306-4538 or 734-249-6310.