Choice of Entity

Right now, we’re getting great advice about choosing the type of entity for the new startup companies…

The lineup…

1. General Partnerships
   • Limited Partnerships
   • Registered limited liability partnership
2. Corporations
   • C-Corp
   • S-Corp
3. Limited Liability Companies

Owners…

1. Partners in the LP
   • General partners
   • Limited partners with limited liability
2. Shareholders
3. Members

Formation and agreement on how the organization runs…

1. Handshake –> complex Partnership Agreement
   • General parnership doesn’t require any filings
2. Articles of Incorporation filed with Probate Judge / Bylaws / Agreement
3. Articles of Organization filed with Probate Judge / Operating Agreement

Liability…

1. General liability / Special rule for limited partners say they have limited ability to participate in the company
2. Shareholders are NOT liable
3. Members not liable

Control / Management…

1. All partners are bosses
2. Board of Directors and Officers
3. Choice of Member-Managed or Manager-Managed

Transferability of Ownership Interest

1. Limited Free Transferability 
2. Yes
3. Limited Free Transferability

Durability of entity…

1. Fragile - any withdrawal creates issues
2. Perpetual
3. Limited perpetual durability

Taxation

1. Pass-through
2. Two-tiered for C-corp / Pass-through for S-corp
3. Pass-through (with 2 members or more, check-the-box to choose… with only 1 member, it is a “disregarded entity” then it is treated as sole proprietorship)