Having a business means more than just ownership. Having your own business entails dealing with various amounts of paperwork and compliance at the Federal, State and possibly local levels. Additionally, there will come a day when you as an owner hopes to expand your small business into something greater.
An important step is to set up a legal business structure. Business structures commonly recognized are Corporations, Partnerships and Professional Corporations. It is wise to have the services of an attorney or lawyer who specialize in business law. Downriver Lawyer is your answer to establishing your business structure from the start as it has a full service team of attorneys who have the knowledge and experience of applicable business law to help you organize your business using a business structure that will best suit your business.
Incorporation is the process of legally declaring a corporate entity as separate from its owners. A Corporation is by definition an association of persons created by law and existing as an entity with powers and liabilities independent of those of its shareholders or in the case of nonprofits, its members. Incorporated businesses can be identified as such because they have legal endings such as Inc., Ltd or Corp. Downriver Lawyers can incorporate your business in the State of Michigan as well as possibly other states depending on where, when and how the business will be conducted.
There are many benefits to Incorporate. They include protection of personal assets; ease in transferability of ownership; ease in setting up retirement and qualified retirement plans such as 401(k) plans; lower tax rates; profit sharing of corporate dividends and provisions have been established at the corporate level for raising capital from investors as needed. While there are benefits, there are also potential downsides to incorporating your business. Again, gaining the services of a knowledgeable attorney or lawyer can be instrumental in bringing all the relevant facts to the business owners attention to make the right decision.
Corporations can also be classified as Limited Liability Companys (LLC). Creating an LLC is a good way to separate your personal assets from your company’s liabilities, offering protection for your personal assets in the event of a legal matter against your business. Forming an LLC is often a better fit for many owners as it also has tax advantages. The business itself is not responsible for taxes on its profits. The LLC’s owners report their share of business profit and loss on their personal tax returns. This is known as “pass through” taxation.
Partnerships, referred to as general or limited liability, are created when two or more people agree to do business together for profit. There are no formal filing or registration requirements in Michigan to create a Partnership. Partnerships must comply with registration filing and tax requirements applicable to any business. A Partnership is the simplest and least expensive co-owned business structure to create and maintain.
Partners are liable for all business debts and obligations including court judgements. Exceptions include partners who have limited liability as setup in the partnership agreement at inception. This means there are partners who run the business and are liable and those that are merely passive investors. Such partners can lose no more than their investment in the partnership. Special rules apply from a tax standpoint as well.
A Michigan Professional Corporation is a corporation that is formed for the purpose of providing a professional service by a for profit or non-profit corporation that would otherwise be prohibited from rendering. A professional service in Michigan is one in which a condition of that service is by obtaining a license in the state as in the case of attorneys, architect, accountants and doctors. Again, the team of attorneys at Downriver Lawyer are well equipped to guide you in this direction should it be the best for your business activity.
Everyone needs guidance in this highly competitive, high tech business world we have become accustomed to. Do not hesitate to contact us. The size and location of your business is not relevant to us here at Downriver Lawyer. Please contact us in Taylor, Michigan or by logging onto our website www.downriverlawyer.com.