Business Organizations

Tax costs, liability exposure, and the practical convenience of various forms of business are the points that  most clients raise when they consider setting up a business organization.

Handshake between businessman and businesswomanDifferent types of ventures require different organizational means: the sole proprietorship, the general partnership, the limited partnership, the limited liability company (LLC) and the corporate form are all possibilities.  Even within the corporate structure, many different kinds of operating procedures are possible.

A new and risky business, or one in which losses are sustained to build capital value, frequently are operated in an unincorporated form, or partnership form, so that any losses may be applied against income and offset with tax savings.

A form of incorporated “partnership”, known as an “S  Corporation,” may also be utilized.  Subchapter S status avoids income tax at the corporate level, and corporate operating losses can be claimed by the shareholders. Where the venture is speculative, and you do not want the risks associated with an unincorporated form, IRC Section 1244 stock may be issued.

A comparison is provided here between the corporation and partnership forms with respect to the factors that will be most important.

Please see also the comparison between the corporation and LLC forms.

Tax considerations play a large role in choice of business organization type. For more information see Tax Considerations.

These tax questions should be discussed with you CPA or tax advisor.


For additional information, please take a look at some of the following posts on related topics:

Why Are LLCs So Popular?

So, You Want To Incorporate?

Important – File Franchise Tax Returns, Even If No Tax Is Due!

What Is The Best Address For A Registered Agent To Use?

Business Succession Planning – Who Can Write Checks?

Where Is Your Corporate Book?

Prepare Your Minutes of Annual Meetings

When Should A Business Hire An Attorney For Commercial Collections?

I Have Never Met Some Of My Clients

Do You Have An Emergency Plan?

What Does a Community Property Interest in a Limited Liability Company (LLC) Get You?

Protecting Ourselves and Our Loved Ones, Personally and For Business

Hey, Back Up!

Check Your Credit Report Free Each Year

Beware of the Corporate Records Service Scam

What Is A Contract?

Should I Let Them Take A Default Judgment?

So You Have The Legal Right To Do It

How To Improve Collections On Accounts Receivables

How To Improve Collections, Part II


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