| Corporate entities come in three categories: the good, | | | | responsible for your own mistakes as well as your |
| the bad, and the ugly. But even among the good, one | | | | partners' mistakes. Not a good way to do business. |
| size does not fit all. Choosing the wrong corporate | | | | The "good" entities are the C Corporation, the S |
| entity can cost you time, money, and your personal | | | | Corporation, the Limited Partnership ("LP"), and the |
| assets. | | | | Limited Liability Company ("LLC"). A corporation, LLC or |
| The "bad" entity is the Sole Proprietorship, where the | | | | LP is a separate legal entity with its own name, |
| owner is personally liable for all claims against the | | | | business purpose, and tax identity with the IRS. The |
| business. If the business gets sued, as owner, you | | | | corporation is responsible for the actions of the |
| could lose more than just the company; you could lose | | | | corporation, not individual owners or shareholders. As |
| your car, your house, everything. Though the | | | | an owner or shareholder, your personal assets are |
| paperwork required for a Sole Proprietorship is minimal | | | | protected. You are only liable for the money you put in |
| and it is the cheapest entity to form, it is almost never | | | | to start the company, thus each corporation offers |
| worth the risk in today's litigious society. | | | | limited liability. |
| The "ugly" entity is the General Partnership, where | | | | Simply filing as a corporation is not enough to protect |
| each partner is responsible for the actions of the other. | | | | personal assets, however. Certain corporate |
| Any partner can obligate the partnership, even if one | | | | formalities must be followed (the same applies for |
| (or more) partner(s) protests a decision. And, as with a | | | | LLCs and LPs) or a creditor will be able to claim that |
| Sole Proprietorship, personal assets may be on the line. | | | | the business is a corporation in name only. In this case, |
| It is also important to understand that General | | | | the corporate veil may be pierced and personal assets |
| Partnerships can be innocently formed. There is no | | | | claimed. |
| filing requirement. A handshake or simple business | | | | Choosing a corporate entity is a detailed, complicated |
| arrangement - anytime you are sharing profits and | | | | process. Work with your Corporate Direct account |
| splitting losses - could be seen by the courts as a | | | | representative to properly set it all up. They will make |
| General Partnership, regardless of the intent of the | | | | sure you choose the right entity, thus avoiding a big |
| parties involved. Remember, with a General | | | | mistake many business owners make. |
| Partnership you have liabilities times two. You are | | | | |