Business Law

If you are a new enterprise, choosing the proper business entity may be the most important decision you make to get your business off to the right start. Our attorneys can provide guidance in choosing the type of business organization which optimizes your company and its resources.  Let Loria & Associates, PC help your business chart its course and start off right.   

Sole Proprietorship:

This is one of the simplest forms of ownership and consists of an unincorporated business that is owned by the principle himself or herself.  Although simple in form, it is imperative to know that this form of ownership has very limited protections.  The owner of this type entity has unlimited liability for the business and is personally liable for any business-related obligations. This means that if your business doesn't pay a supplier, defaults on a debt, or loses a lawsuit, the creditor can legally come after your house or other possessions.

General Partnerships :

This business arrangement involves two or more individuals or other persons (such as a corporation and an individual) that conduct business as "partners", whether officially or not.  In terms of asset protection, general partnerships can be even worse than sole proprietorships as anything that one partner does affects all of the partners, because each partner of the of the general partnership is personally responsible for all obligations of the partnership. Thus each general partner's exposure to risk is increased by a factor equal to the number of general partners in the business.  

Limited Liability Companies (LLC) –

A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.  This type of entity is very popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. However, unlike the Corporation, this entity is more flexible in so for as management flexibility and the benefit of pass-through taxation.

Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities.  There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.

Corporations:

A Corporation is a legal personality, separate and distinct from the individual(s), usually used to manage and conduct business.  Five common characteristics of the modern corporation, according to Harvard University Professors Hansmann and Kraakman are:

1. Separate Legal Personality:
   • the right to sue and be sued in its own name
2. Limited Liability of the Shareholders:
   • If the company goes insolvent, the shareholders only owe the money that they subscribed for in shares
3. Transferable shares
4. Delegated Management, in other words, control of the company placed in the hands of a board of directors
5. Investor ownership, which Hansmann and Kraakman take to mean, ownership by shareholders. [1]

S Corporation:

This S-Corporation has the same characteristics of the Corporation with the benefit of being able to report income on personal tax returns thus avoiding double taxation.  This advantage is derived pursuant to Section 1362 of the Internal Revenue Code.  Individual shareholders who wish to obtain this option must file federal Form 2553.

1: Hansmann et al, The Anatomy of Corporate Law (2004) Ch.1, p.2; See also, C. A. Cooke, Corporation, Trust and Company: A Legal History, (1950).

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