– Business –
Formation Law

Business Formation Law is regulated by each state authorities, however, most state laws for this are very similar. There are five forms of business: sole proprietorship, general partnerships, limited partnerships, corporations, and limited liability companies. Despite these all being options, few federal laws may affect which business formation a business may become. Some of these exceptions include federal tax laws or employment laws. Starting with a sole proprietorship, this means one person owns all aspects of the business and all assets are assigned to this person’s name. Often times, small businesses are indeed sole proprietorships and these often require little capital to get going. A general partnership is a joint business, meaning all general partners, two or more sole proprietors, involve will hold equal responsibility for the major decisions and aspects of the business such as management, profits, or debts. Limited partnerships differ from general partnerships as they are formed with an initial agreement between the general partners and limited partners. These limited partners help the business with funding and in turn, receive a predetermined share of profit. This allows businesses with limited partnerships to receive additional investments than otherwise possible. Corporations are different as they identify as one artificial person with the approval from the state government. For this reason, corporations can issue stock and sue or be sued. The last formation is the limited liability company (LLC) which is a non-corporate business in which the company owners are involved in the organization’s management and are protected under personal liability for the organization’s debts and responsibilities.