If you are trying to decide whether to create a limited liability company (LLC), corporation, or partnership, at The Law Offices of Warner Mendenhall, we work with you to ensure that the entity you form is the best fit for your business startup.
In the past, companies would incorporate, be a partnership, or be a sole proprietorship. Each one of these corporate entities has unique properties that makes it appropriate for different business types. Within the past thirty years, the LLC was approved and codified by the Ohio State Legislature under R.C. 1705. An LLC or limited liability company has unique qualities derived from corporate and partnership law.
The limited liability aspect of an LLC is derived from corporate law. This quality shields the LLC members from personal liability for disputes arising during operation. For an LLC to retain its limited liability qualities, the member or members must treat it as a separate legal entity. Common ways to preserve limited liability include keeping different bank accounts for each LLC, keeping your personal finances separate from the business, and representing the business as its own legal entity separate from its members.
The LLC has a unique tax structure for its members. It can be taxed like an S-Corp, a general partnership, or C-Corp. If you pick the S-Corp and general partnership tax structure, your business income will be taxed as personal income. This “flow-through taxation” means your business will not pay a corporate tax rate. If circumstances require your business to have a corporate tax structure, then the revenue it receives will be taxed at the corporate tax rate, and each member will pay income tax on top of the corporate rate.
Each business should consider what type of entity and structure would be most appropriate to meet their goals. We meet with clients and develop a tailored plan for your situation. Along with deciding what entity is best for your business, we file the required paperwork with the secretary of state to get your business started. For a free consultation, please contact us.