Tulsa Business Attorney - Creating the Business Entity

 

When starting a business, it is much easier and far less expensive to do things right at the start than to fix a mistake down the road. Ms. Schmook can explain each business entity to you, and help you make the right decision for your business. Ms. Schmook can help you get the business legally started, and all accompanying documentation filed correctly.

If your small business has legal needs, including agreements, organizational structures, and disputes, it is best to use someone who concentrates on business law, so your business is created in a fashion that protects you.

Selecting the type of business entity is an important tool to maximize the functionality and profitability for your specific business. Common entities include:

Sole Proprietorship,

A sole proprietorship is as the name suggests, a business with one owner. Of the four structure types, this one is the most common. In fact, over 80 percent of businesses nationwide are organized as sole proprietorships. A business organized as a sole proprietorship is not separate from the owner, but merely a name with which the owner represents him/herself to the public. They are essentially inseparable.
What Is Good about This Business Structure: Simple to organize. Owner makes all decisions. Minimum legal restrictions. Owner receives all the profits. Business is easy to discontinue.
What Is Bad about this Business Structure: Owner has unlimited liability. Owner is personally liable for the debts of the business. You may have difficulty raising capital.

LLC (Limited Liability Company),

The limited liability company is a hybrid of business structures. It is part partnership and part corporation. This structure provides the benefits of partnership income taxation with limited personal liability for the members.
What Is Good about This Business Structure: Organized to qualify for taxation as a partnership (2 or more members) and a sole proprietorship (one member). No member is liable for the debts and liabilities of another LLC member. No limitation on what persons or type of entities may be LLC members. Perpetual like a corporation. One person may qualify for LLC status.
What Is Bad about this Business Structure: May not be used by banking, insurance or nonprofit entities. Can elect to be treated as a corporation for tax purposes.

PLLC (Professional Limited Liability Company),

Similar to the limited liability company, this entity is only available for a business entity for licensed professions, such as lawyers, doctors, architects, accountants, and chiropractors. It is part partnership and part corporation. This structure provides the benefits of partnership income taxation with limited personal liability for the members.
What Is Good about This Business Structure: Organized to qualify for taxation as a partnership (2 or more members) and a sole proprietorship (one member). No member is liable for the debts and liabilities of another LLC member. No limitation on what persons or type of entities may be LLC members. Perpetual like a corporation. One person may qualify for LLC status.
What Is Bad about this Business Structure: May not be used by banking, insurance or nonprofit entities. Can elect to be treated as a corporation for tax purposes.

Partnership,

A partnership is a relationship between two or more persons who join together to carry on a trade or business. There are two type of business partnership structures: A General Partnership is an agreement with one or more individuals to jointly own or share profits of a business. There are no limits to the number or type of partners (types of partners include individuals, other partnerships, or corporations). A Limited Partnership consists of one or more general partners (those who are generally liable for the business) and one or more limited partners. A limited partner is one who have limited liability in the business. This structure must file organizing documents with the Oklahoma Secretary of State.
What Is Good about This Business Structure: Greater financial strength than sole proprietorship. Combines skills and judgments with partner(s). Definite legal status. Each partner has a personal interest.
What Is Bad about this Business Structure: Unlimited liability for each partner. Decision authority is divided.

C-Corporation,

With the "C" corporation structure, all income goes to the corporation and dividends are paid to the stockholders of the corporation.
What Is Good about This Business Structure: Life of corporation is perpetual. Stockholders have limited liability. Transfer of ownership is easy (sell stock). Management may be more efficient.
What Is Bad about this Business Structure: Subject to special taxation- double taxation. Cost more to organize. Subject to state and federal controls. Charter may restrict type of business activities.

S-Corporation,

With the "S" corporation structure, all income goes to the corporation and dividends are paid to the stockholders of the corporation.
What Is Good about This Business Structure: Life of corporation is perpetual. Stockholders have limited liability. Transfer of ownership is easy (sell stock). Management may be more efficient. Income is taxed similar to the partnership and all income and expenses are divided among the shareholders who report it on their individual income tax returns.
What Is Bad about this Business Structure: Cost more to organize. Subject to state and federal controls. Charter may restrict type of business activities.

These Business entities may require accompanying documents, including, but not limited to:

  • Governing Documents
  • Operating Agreements
  • Shareholder Agreements
  • Bylaws
  • Buy-Sell Agreements
  • Partnership Agreements
  • Employee Manuals

If you are in need of a legal opinion from a Tulsa Business Attorney, feel free to contact Ms. Schmook for a free consultation.