Business-OrganizationsWhen a client wants to start a new business or purchase an existing one, one of the initial considerations is whether or not to incorporate or what unincorporated business entity will best benefit his or her business’ needs. Choosing a business organization as an unincorporated business (for example, as a sole proprietorship, general partnership, limited liability partnership, or limited liability company, etc.) or as a corporation depends on tax and non-tax factors. For instance, certain businesses cannot be incorporated, while other businesses, like medical practices, banking and insurance institutions, must be incorporated. However, clients involved in a wide range of business activities, have the choice of the form of business organization.

Business organization considerations involve how the business entity is taxed, the amount of individual liability, and the amount of control an individual has over the business. For instance, in a sole proprietorship, the business is the individual. In this sense, the individual has full authority and control over the business but also assumes unlimited liability for all debts incurred by the business, and the business is taxed as an individual.

Our Chicago corporate lawyers advise our clients on both tax and non-tax related factors to consider when creating a new business or acquiring an existing one, in order for the business organization to best suit the type of business.
On the other hand, a general partnership may best benefit a business entity with more than one owner, which doesn’t have significant exposure to liability.  The general partnership and is very similar to a sole proprietorship with two exceptions: each partner of a general partnership has unlimited liability for the business’ debts and each partner has the implied authority to bind the firm to third parties within the scope of the usual and ordinary activities of the particular business. Many businesses decide to organize as limited liability companies because the partners (or in the case of a limited liability company, it’s members) have limited liability as to debts and responsibilities, they all have full management power, and there are various tax benefits to this type of organization.