When starting a business, you are faced with numerous decisions—location, hiring, marketing, etc. However, one of the most important decisions you will make, should be one of the first—what type of business should be used?
Sole proprietorship. This is the simplest to set up, but offers no asset protection to its owner. A sole proprietorship is a business opened in one person’s name.
General partnership. As with sole proprietorships, general partnerships offer no protection of your personal assets. The primary difference between a sole proprietorship and a general partnership is the number of people involved. A general partnership involves at least two partners. While a written agreement is not required, it is recommended that you reduce your relationship and your respective responsibilities to writing.
Limited liability partnership. A limited liability partnership involves at least two people—one general partner and one limited partner. This is most commonly seen where one of the partners is a silent partner, or the money man, and the other partner runs and manages the business. The silent partner is protected from personal liability, but cannot participate in the daily operation of the business without running the risk of exposing himself to personal liability. The general partner is not protected from personal liability.
Corporation and Limited Liability Company. Corporations and limited liability companies provide the largest amount of protection from personal liability. The business itself becomes an entity separate from its shareholders or members. The shareholders and members are generally not personally liable for the business debts. That said, unless the corporation or limited liability company are properly operated, personal liability still remains a possibility.
Contact Marc Simon Law—your Las Vegas real estate attorney—today to discuss your business formation needs!