Your business plan is in place and you’re ready to make it official.
Now what? While it may be tempting to use an online service that quickly
allows you to “incorporate,” we caution against this. The
formation of a new business – and the ideas born with it –
is a delicate situation that must be handled carefully and thoughtfully.
Sure, it’s understandable to want to keep the momentum going; however,
rushing through the entity selection process is not a shortcut you’ll
want to take.
From the shareholders and partners involved in your business to the types
of funding you can possibly receive down the line, your choice of entity
plays a huge role in the overall structure of your business. So it’s
important to choose wisely. Keep in mind that entity selection doesn’t
happen at the federal level; it’s state-specific and subject to
the individual laws where you will be conducting business. In Georgia,
the most popular entity is that of the Limited Liability Company (LLC).
The Limited Liability Company (LLC)
The Limited Liability Company is a hybrid entity that allows for the business
to be taxed as a partnership
or a corporation. Perhaps most appealing about an LLC is the fact that it
provides the liability protection of a corporation while giving business
owners options on how they would like to be taxed. LLCs are comprised
of members, not shareholders. So long as corporate formalities specific
to the state are observed, individual members will typically be protected
Benefits of incorporating as an LLC business include:
Pass-through taxes: When it comes to federal taxes, an LLC business will usually be treated
as a pass-through entity, making a corporate tax return unnecessary. Most
LLCs are taxed as partnerships because it’s more beneficial. Owners
can report their profit shares and losses on individual tax returns and,
in the process, avoid double taxation.
Limited personal liability: By definition, an LLC is considered a legal entity separate from the individual
members and owners of the business. As such, the owner will not be held
personally liable for debts or legal responsibilities of the LLC.
Flexible sharing profits: Members of an LLC business have the unique ability to determine how profits
will be allocated according to the terms specified in the LLC operating
agreement. They are not limited by their proportion of ownership.
Other Types of Popular Business Entities in Georgia
General Partnerships are relatively easy to form and require few, if any,
formal procedures to establish. The General Partnership is based on an
agreement between two or more partners who agree to perform business under
the same name. All partners have the ability to make management decisions,
and will be personally liable for the partnership, including any debts
and incomes that go along with it.
Limited Partnerships are formed between one or more general partners and
one or more limited partners. Because partners have different roles in
the company, they will also share different liability. General partners
have unlimited liability while limited partners are liable only to the
extent of their contributions. Accordingly, only general partners can
make management decisions in a Limited Partnership.
Joint Stock Companies
Joint Stock Companies are registered at the Georgian Stock Exchange, typically
by a single founder. As such, shareholders of the business will not be
held personally liable for debts accrued by the company. However, shareholders
are responsible for deciding upon and authorizing a share capital. If
shares are registered at the stock market, a supervisory board will be
appointed as well.
Buckley Beal LLP: Your Business Law Advocates in Atlanta
The process of choosing a business entity is best done under the guidance
of legal professionals who can help ensure you make the best decision
for you and your company. At Buckley Beal LLP, our Atlanta business litigation
lawyers can help. With more than 85 years of combined legal experience
to our name, we are one of Atlanta’s leading law firms for all business-related matters.
Unwavering in our commitment to protecting the rights of business owners
in Georgia, we can be relied upon to help with your case. Our trusted
legal team handles business litigation matters of every nature, from breach
of contract to shareholder disputes, and more. Contact us today to learn more.