New Business formation
Hammond, Indiana, Business formation Lawyers
A Knowledgeable Indiana Business Formation
After making the decision to go into business, a new business owner must determine the appropriate legal entity for the new business. The determination of the appropriate legal entity is an important decision that implicates legal and tax consequences that must be fully explored. The attorneys at Efron & Efron will work with our clients and their accountant to select the most advantageous form for their new business. The following is a summary of various business alternative forms.
In a sole proprietorship, one owner controls the business and assets. A sole proprietorship is not taxed separately from the owner. The owner declares the business income or loss on the owner's personal income tax return ("pass through" taxation). However, the business owner is personally liable for all the business' debts and obligations.
In a general partnership, two or more persons agree to operate a business together for profit. Every partner has the power to make contracts on behalf of the partnership and these contracts are binding on all of the partners, even if they did not consent. Each partner is personally liable for all of the partnership's liabilities, and a creditor is entitled to collect all monies due from a single partner. A general partnership is not taxed separately from the partners. The partners declare partnership income or loss on their individual income tax returns ("pass through" taxation).
In a limited partnership, one or more general partners manage the business and are personally responsible for all of the partnership's liabilities. One or more limited partners contribute capital and receive a share of the business profits. Limited partners do not take part in managing the business, and if they are too active in the running of the business they are subject to losing their "limited" partner status and risk becoming personally liable for the business. A limited partnership is not taxed separately from the partners. The partners declare partnership income or loss on their individual income tax returns ("pass through" taxation).
Limited Liability Company
A limited liability company has "members" who usually own and manage the business. However, a limited liability company is allowed to have non-owner "managers" run the company instead of members. Most states allow a single person to operate as a limited liability company, but some states require that a limited liability company consist of two individuals. Members are not personally liable for the debts and obligations of the limited liability company. The limited liable company is not taxed separately from its members. The members declare company income or loss on their individual income tax returns ("pass through" taxation).
Unlike a sole proprietorship or a partnership, a corporation is recognized for all purposes as a legal entity separate from its owners. A corporation is a hierarchy. The shareholders are investors who have little say in the management of the corporation. Shareholders elect a Board of Directors and the Board of Directors designate officers to carry out the business of the corporation.
A "C" corporation is a separate tax-paying entity whose profits are subject to corporate income tax rates. Shareholders are not personally liable for the debts and obligations of the corporation.
An "S" corporation may have no more than seventy-five shareholders and they must be U.S. citizens or resident aliens. There can be only one class of stock. An "S" corporation is taxed like a partnership, and the shareholders are not personally liable for the debts and obligations of the corporation.
Contact our Indiana Business Formations Attorneys
Please contact the Indiana business formations lawyers at Efron & Efron. Our attorneys can be reached by phone at  931-5380, by e-mail, or by filling out the intake form on our Contact Us page.