Entity Selection Considerations<title><META NAME="DESCRIPTION" CONTENT="Entity Selection Considerations"><META NAME="KEYWORDS" CONTENT="Entity Selection Considerations"><link href="css/style.css" rel="stylesheet" type="text/css" /> </head> <body> <script type="text/javascript" src="js/jquery.min.js"></script> <script type="text/javascript" src="js/fadeslideshow.js"> </script> <script type="text/javascript"> var mygallery=new fadeSlideShow({ wrapperid: "fadeshow1", //ID of blank DIV on page to house Slideshow dimensions: [910, 246], //width/height of gallery in pixels. Should reflect dimensions of largest image imagearray: [ ["images/banner1.jpg" ], ["images/banner2.jpg"], ["images/banner3.jpg"], ["images/banner4.jpg"], ["images/banner5.jpg"], ["images/banner6.jpg"] //<--no trailing comma after very last image element! ], displaymode: {type:'auto', pause:2500, cycles:0, wraparound:false}, persist: false, //remember last viewed slide and recall within same session? fadeduration: 1500, //transition duration (milliseconds) descreveal: "ondemand", togglerid: "" }) </script> <div id="warp"> <div id="header-bg"> <div id="contaner"> <div id="header"> <div id="header-top"> <a href="mailto:info@savagelaw.us"><img src="images/header-email.jpg" border="0" alt="Header email image of Savage Law, Business lawyer Florida"/></a> <h1>The Savage Law Firm, <span style="font-size:18px;">PA Tampa, Florida</span></h1> <div style="height: 12px;"></div> <p class="pa">A Professional Association</p> <span class="phone">813-251-4890</span><span class="ESQ">Robert Savage, ESQ</span> <div class="clear"></div> <div id="nav"> <ul> <li><a href="index.shtml" >Home </a></li> <li><a href='OurAttorneys.shtml' >Our Attorneys</a></li><li><a href='ArticlesFAQs.shtml' >Articles/FAQ’s</a></li><li><a href='ContactUs.shtml' >Contact Us</a></li><li><a href='Resources.shtml' >Resources</a></li><li><a href='Mediation.shtml' >Mediation</a></li></ul> </div> </div> <div class="clear"></div> <div id="banner"> <div id="fadeshow1" style="_margin-top: -3px; "></div> </div> <img src="images/bottom-banner.jpg" alt="Bottom banner image of Savage Law, Stock Loss Lawyer"/> </div><div id="content2"> <div id="leftnav"> <ul> <li><a href='PracticeAreaOverview.shtml'>Practice Area Overview</a></li><li><a href='FacilitatingForeclosures.shtml'>Facilitating Foreclosures</a></li><li><a href='Negligence-Fraud.shtml'>Stockbroker Misconduct</a></li><li><a href='Stockbroker-Brokerage.shtml'>Stockbroker Representation</a></li><li><a href='Business-Consulting.shtml'>Business Services</a></li><li><a href='Mediation.shtml'>Mediation</a></li><li><a href='Overview.shtml'>Business Dispute Resolution</a></li><li><a href="calendar.php?month=9&year=2010">Calendar </a></li> <li><a href="/blog">Blog </a></li> </ul> <div style="height: 15px; "></div> <center><a href="http://www.avvo.com/attorneys/33602-fl-robert-savage-1285709.html?cm_mmc=Avvo-_-Avvo_Badge-_-Micro-_-1285709" target="_blank" style="margin: 10px 0px 0px opx;"><img alt="Avvo - Rate your Lawyer. Get Free Legal Advice." src="http://assets1.avvo.com/images/microbadge.png?1267488232" border="0" /></a></center> </div><div id="right"> <h1>Entity Selection Considerations</h1><p style='margin-left:50px;'><h3 style="margin-left: 40px;"><strong>Questions for Tampa, Florida based business attorney Robert K. Savage:</strong></h3> <strong><em><span style="color: rgb(0, 0, 0);"> <h4 style="margin-left: 40px;">What considerations are there when considering which type of business entity to use for my Business?</h4> </span></em></strong> <h4 style="color: rgb(0, 0, 0); margin-left: 40px;">This is a good question and there are a number of factors to consider when choosing a particular business type.</h4> <p class="MsoNormal"><span style="color: rgb(0, 0, 0);">Each type of business entity has its own distinguishing aspects that help you decide which entity type is best for you.<span> </span>Some of the fundamental factors to consider <a name="Document1zzSDUNumber9" title="Document1zzSDUNumber9"></a>include the following: </span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>1.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">How complex is it to form the business entity?</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span>2.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span><span style="color: rgb(0, 0, 0);">Does the underlying business have any financing and credit needs that can be met more easily with one type of entity than another?</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span>3.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span><span style="color: rgb(0, 0, 0);">How do you want a flexible structure in which to allocate profits and losses or do you prefer a more rigid structure?</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span>4.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span><span style="color: rgb(0, 0, 0);">Are you trying to limit personal liability that might attach to the principal(s)? </span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span>5.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span><span style="color: rgb(0, 0, 0);">Do you want to make it easy for the company to allow owners to sell (or otherwise transfer) their ownership interests?</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span>6.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span>How do you want profits and losses to be treated from a tax viewpoint?</p> <h4 class="MsoNormal"><strong><em><span style="color: rgb(0, 0, 0); margin-left: 40px;">What are the basic types of business entities?</span></em></strong></h4> <p class="MsoNormal"><strong><em><span style="color: rgb(0, 0, 0);"> </span></em><span style="color: rgb(0, 0, 0);">There are normally four main types of businesses people use.<span> </span></span></strong></p> <p class="MsoNormal"><span style="color: rgb(0, 0, 0);">Each of the most common type of business entity has its distinct formation and operation requirements.<span> </span>The basic four types of business entities and their sub-groups are (without considering taxes):</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>1.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Sole proprietorship:</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>2.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Partnerships</span></p> <p style="margin-left: 90pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>a.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">General partnership</span></p> <p style="margin-left: 90pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>b.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Limited partnership</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>3.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Corporate Forms</span></p> <p style="margin-left: 90pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>a.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Regular corporation</span></p> <p style="margin-left: 90pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>b.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Statutory close corporation</span></p> <p style="margin-left: 90pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>c.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Professional corporations</span></p> <p style="margin-left: 54pt; text-indent: -18pt;" class="MsoNormal"><span style="color: rgb(0, 0, 0);"><span>4.<span style="font-family: 'Times New Roman'; font-size-adjust: none; font-stretch: normal;"> </span></span></span><span style="color: rgb(0, 0, 0);">Limited Liability Companies</span></p> <p class="MsoNormal"><span style="color: rgb(0, 0, 0);"> </span>There are other types of possible business entity types such as the business trust or registered limited liability partnership but such entities have a limited application.<span> </span>Also there may be a mix of entity type where, for example, there is a limited partnership with a corporation as the general partner.</p> <h4 class="MsoNormal" style="margin-left: 40px;"><strong><em>How do the different business entities differ?</em></strong></h4> <p class="MsoNormal">The different types of entities can be generally distinguished by looking at the management structure, liability limitations, transferability of ownership interests, and continuity upon death, retirement, or transfer of ownership interests of business owners.</p> <p class="MsoNormal"><em>Corporations: </em>In general, a corporation will have centralized management and control in the hands of a small group of managers even though there may be many shareholders.<span> </span>The shareholders liability is limited to their investment in the company because they will not be held accountable for the company’s debts.<span> </span>A corporation’s shares are relatively easy to sell or otherwise transfer and transfers do not cause a corporation to stop existing.</p> <p class="MsoNormal"><em>Partnerships: </em><u>General Partnership</u> - Unlike <span style="color: rgb(0, 0, 0);">corporations partnerships have a decentralized management because in a general partnership each of the partners has the right to participate in business management unless there is a different agreement among the partners. <span> </span>In a partnership, the general partner has unlimited personal liability for the company’s debts and other obligations.<span> </span>Another distinguishing feature is that if a general partner withdraws from the partnership that departure can lead to dissolution of the partnership and the end of the partnership’s business. <span> </span><u> Limited Partnership</u> - A limited partnership runs like a general partnership except that the limited partners do not have the unlimited liability of a general partner and the limited partners have limited management input but their liability is limited to only their investment in the company.</span></p> <p class="MsoNormal"><em><span style="color: rgb(0, 0, 0);">Sole Proprietorships: </span></em><span style="color: rgb(0, 0, 0);">A sole proprietorship shares some characteristics with a general partnership except that with a sole proprietorship there is only one single owner.<span> </span></span></p> <p class="MsoNormal"><em><span style="color: rgb(0, 0, 0);">Limited Liability Company:</span></em><span style="color: rgb(0, 0, 0);"><span> </span>The LLC has become popular because it allows each of the owners to participate in the management of the business yet avoid the liability of a general partner. </span></p></p> </div> </div> <div class="clear"> </div> <div id="main"></div> <div class="clear"> </div> <img src="images/savage-farm.jpg" alt="Savage-farm image of Business attorney Florida" /> <div id="bottom"> <p>We have a local, regional and national practice. 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