Starting a New Business?
We can provide advice and guidance on selecting an appropriate business form based upon your particular situation. Additionally, although we do not provide tax advice, we can identify potential issues that you should discuss with your accountant or tax advisor.
Unincorporated Business Associations
Sole Proprietorship
A sole proprietorship is the simplest form of a business. No new legal entity is created, and no written document is necessary to form a sole proprietorship. However, a tax identification number, business licenses, and insurance may be necessary to run the business. Because a sole proprietorship is not a separate legal entity, the sole proprietor has unlimited personal liability for business obligations.
Partnership
A partnership is a group of two or more people who come together to carry on a business for profit. Although a written partnership agreement is not required, a written agreement may be advisable so all partners understand their responsibilities and obligations. A tax identification number, business licenses, and insurance may be necessary to run the business.
A partnership is treated for many purposes as a separate legal entity and therefore can sue or be sued in the partnership name. However, for other legal purposes, a partnership is not treated as a legal entity. For example, a general partner could be subject to unlimited liability for partnership obligations as well as the acts of other partners that are performed in the scope of the partnership relationship.
Limited Partnership
A limited partnership is a business formed by two or more persons that consists of one or more "limited partners," who invest money but do not participate in management of the business, and one or more "general partners," who control the business. A limited partnership is formed by filing a Certificate of Limited Partnership with the Secretary of State.
A general partner has unlimited personal liability for partnership obligations. However, a limited partner typically is liable only for the amount of his or her capital contribution to the limited partnership.
South Carolina law requires that certain arrangements among partners in a limited partnership be contained in a written partnership agreement. A tax identification number, business licenses, and insurance may be necessary to run the business.
Corporations and Limited Liability Companies
In simple terms, a corporation or limited liability company ("LLC") may be thought of as an "artificial person." The corporate or LLC form is often employed in an attempt to limit personal liability for contract debts or tort damages. However, this protection may be voided by failure to maintain a strict separation between your personal and business dealings or by executing personal guarantees for corporate or business obligations.
A corporation is created by delivering Articles of Corporation to the Secretary of State. There are several options for forming a corporation, including professional corporations and statutory close corporations.
The limited liability company is a relatively new business entity. The Uniform Limited Liability Company Act was enacted in South Carolina on June 1, 1996. An LLC is created by delivering Articles of Organization to the Secretary of State and may be either at-will or for a term; either single-member or multi-member; and either member-managed or manager-managed. LLCs are not required to observe all of the same formalities that are required of corporations.
The advantages and protection of Chapter 13 bankruptcy are not available to corporations, LLCs, or other incorporated business entities.
Contact Ingram Law Firm to schedule a consultation to discuss your options for the formation of your business.