LLC's, Corporations, and Partnerships
We provide a wide variety of services for corporations and other business entities, including the formation of limited liability companies, partnerships, and corporations, along with a full range of business oriented services such as drafting contracts, leases, and other documents, and facilitating transactions such as the purchase or sale of real property. Further, we can help ensure that your business is meeting all the state legal requirements necessary to maintain the limited liability protections of your business entity of choice.
Personal liability is an important topic to consider when forming a business. Personal liability is a legal term that explains how closely your personal debts and assets are tied up with your business. If you have no personal liability, then none of your business’s debts are counted against your personal assets, in effect the business is totally separate from you. This means if the business takes on a debt, due to some negligent act, contract dispute or lawsuit, then those creditors can’t seize your home, cash, or other personal assets to settle the debt. While no legal structure gives you complete liability protection, some grant more options than others.
LLC's (Limited Liability Companies)
A Limited Liability Company (LLC) is a business structure that is owned and managed by members who are granted limited liability. Unlike a sole proprietorship, an LLC provides a separation between personal assets and the profits of a business. For example, if a sole proprietorship goes under, the owner can also lose their personal finances because they are inextricably linked. If an LLC starts to tank financially, the owner or partners will not be vulnerable to lose their personal finances, unless they have personally guaranteed the debt.
A corporation is a limited liability entity, which means that shareholders of a corporation are not personally responsible for the corporation’s financial or legal obligations. Many people form corporations because of this, as well as possible tax benefits.
Types of Partnerships: Liability & Tax Considerations
For tax purposes, partnerships are considered pass-through entities. This means the profits and losses from the partnership are reported on the owners’ personal income. The IRS has more information on how partnerships handle federal taxes.
General Partnership (GP)
The simplest partnership structure, a general partnership offers no liability protection. The partners (called general partners) are liable for all the debts of the GP regardless of how the debts were incurred or which partner was responsible for incurring them.
As mentioned above, all partnerships in Georgia are considered pass-through entities. Thus the general partners have to report the income or losses sustained by the business on their individual tax returns.
Limited Partnership (LP)
In Georgia, limited partnerships allow businesses to be created with two partnership levels, general partners and limited partners. The limited partners benefit from being protected from liability for the debts of the business beyond their own personal investment in it. The general partners, however, are still personally responsible for all the partnership debts.
General partners, however, are authorized to make the major decisions regarding how the partnership will be ran. This partnership is popular with companies that are trying to raise money because investors can invest freely, knowing they are only liable for the money, equipment, or assets they invest.
Like GPs, LPs are also considered pass-through entities. Each partner (whether a limited or general partner) has to report his or her share of the profits of the business on both the state and federal tax returns.
From representing the entrepreneur ready to start their own business, to the established business owner looking for sound business advice, The Carr Law Group has years of experience to help guide you through the legal process and protect you and your business. Please contact us to schedule a free consultation.