| HOME
> Business & Corporate Services |
By Donna Ray Chmura
One of the first decisions facing a new business is the form of business entity.
The decision is based on the liability (risk) associated with the business venture,
the anticipated growth, the number of people in the business and, frequently,
taxation issues. There are several available entities, including the sole proprietorship,
joint venture, partnership, corporation, and limited liability company. The
only ways that a natural person can do business as himself or herself are through
a general partnership or a sole proprietorship. Any entity that seeks to limit
liability to something other than a natural person (i.e., a corporation or a
limited liability company) is created by statute, and will have the rights and
limitations specified in the statute and governing legal documents. While there
are uniform sets of laws governing all types of entities, not every state has
adopted the uniform laws, and some states have changed the uniform language.
The federal tax law allows each of these types of entities, but every entity
may not be recognized in every state.
Although the actual preparation and filing of the formation documents (such
as Articles of Organization or Articles of Incorporation) appears to be a simple
“fill-in-the-blank” process, an attorney “just helping out”
friends or family members by preparing filings for the Secretary of State can
seriously impact a company’s future through his or her ignorance. Preparing
and filing the respective forms is easy, but knowing the implications of choosing
certain entities is not. Note that, the attorney is subject to malpractice for
mistakes made in performing this “unofficial” act.
In addition to setting up an appropriate corporate entity, attorneys working
with start-up businesses must be ready to counsel clients concerning insurance
coverages for professional malpractice, hazards (fire, etc.) and public liability
(slip and fall on the business premises); financing opportunities; employee
policies; leases; zoning; business licenses; and how to set up general office
procedures. It is important for a start-up business to work with an accountant
and a lawyer, as the bookkeeping and accounting systems should be correctly
set up at the beginning.
The following terms and abbreviations and definitions are given here for ease
of reference.
C-Corporation (“C-Corp”): a for-profit corporation
formed under Chapter 55 of the North Carolina General Statutes.
General Partnership: an association of two or more individuals
operating a business for profit.
Joint Venture: An agreement between or combination of two
or more parties for a specific purpose that generally is governed by contract
or partnership law.
Limited Liability Company (“LLC”): An entity formed
under Chapter 57C of the North Carolina General Statutes.
Limited Liability Partnership (“LLP”) or Registered
Limited Liability Partnership (“RLLP”): a general partnership
that has limited liability in some situations, formed under Article 3B of Chapter
59 of the North Carolina General Statutes.
Professional Association or Professional Corporation (“P.A.”
or “P.C.”): A corporation
formed to provide services that are licensed by the State of North Carolina
(legal, medical, engineering, etc) under Chapter 55 B of the North Carolina
General Statutes.
Professional Limited Liability Company (“P.L.L.C.”):
a limited liability company formed to provide services that are licensed by
the State of North Carolina (legal, medical, engineering, etc) under Chapter
57C-2-01(c) and Chapter 55 B of the North Carolina General Statutes.
Registered Limited Liability Partnership (“RLLP”)
or Limited Liability Partnership (“LLP”): a general
partnership that has limited liability in some situations, formed under Article
3B of Chapter 59 of the North Carolina General Statutes.
S-Corporation (“S-Corp”): A corporation formed
under Chapter 55 of the North Carolina General Statutes that qualifies under
Internal Revenue Code, Title 26, Chapter 1, Subchapter S to elect to pass all
income and losses through to shareholders directly.
Sole Proprietor or Sole Proprietorship: an
individual doing business for his own account.
© 2005 Walker, Lambe, Rhudy & Costley, P.L.L.C.
|
SERVICES 
