Jonathan Frost, Business Lawyer

© Copyright 2019 by Jonathan Frost

© Copyright 2019 by Jonathan Frost

1990 N California Blvd 8th Floor

Walnut Creek, CA 94596

(415) 955-1935

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Different Choices of Entities - At a Glance


Limited Liability Company (LLC)

Limited Liability Companies are the most common type entity. LLCs are governed by an operating agreement.

  • Increased flexibility and freedom

  • Lower operational overhead

  • Can be managed by a designated “Manager” or managed by the “Members” (stockholders)

  • Members are protected by the corporate veil (assuming compliance with California requirements)

  • Default tax status is pass-through partnership taxation

Corporations

Corporations are the primary entity for publicly traded companies, and are governed by the Bylaws.

  • Minimal flexibility

  • Greater accountability and predictability for outside investors

  • Shareholders are protected by the corporate veil

  • Managed by a board of directors, who appoint officers, such as the president and other executives, to carry on the business

  • Default tax status of a corporation is C-Corporation

Partnerships

Partnerships are similar to LLCs, except that partnerships are unincorporated.

  • Can arise unintentionally, by two people acting jointly for profit.

  • Members are not protected by the corporate veil, and are subject to personal liability for all business debts.

As LLCs offer substantially the same benefits as partnerships, general partnerships have become far less common.

Sole Proprietorships

A sole proprietorship is an unincorporated business, where the proprietor may file a DBA (Doing Business As) and carry on business without the benefit of a separate business entity.

  • Members are not protected by the corporate veil

  • Typically chosen as a cost saving measure or procrastination



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