Common Business Entities

Choosing the right business entity is a critical step in protecting your assets and ensuring your company’s success. Whether you are starting a sole proprietorship, partnership, corporation, or limited liability company (LLC), each option has unique tax rules, liability protections, and management structures.

At Helton Law Firm, our experienced Tulsa business lawyers can guide you through the benefits and risks of each entity type so you can make an informed decision that aligns with your goals. Below, we explain the key features of the most common business structures to help you determine the best fit for your situation.

Sole Proprietorship

In a sole proprietorship, an individual who owns an unincorporated business operates on his or her own behalf. Business profits and losses are reported on the owner’s tax return and not on a separate business filing.

Liabilities of the business are the owner’s personal responsibility, so if someone sues the business for any reason (i.e., debt collection, breach of contract, personal injury), the court can directly garnish the owner’s personal bank account and other property.

While the sole proprietorship is a simple and relatively inexpensive way to operate a business, there are significant liability issues to consider. Operating as a sole proprietor is not usually advisable.

Partnership

With a partnership, an agreement is established between two or more people to own the business jointly and share profits and losses. Business liabilities are the potential responsibility of each owner.

Profit and loss distribution is determined in the partnership agreement and passes through to the individual partners, and is not necessarily determined by the ownership percentages. Control of the business is also determined by the partnership agreement and, unless stated otherwise, is jointly controlled by the partners with each having an equal vote.

As with sole proprietorships, personal liability is a risk if a problem arises. Some risks to the partners can be reduced by operating as a limited liability partnership (LLP). A Tulsa business attorney can help you determine which type of partnership is right for you.

Corporations

Corporations are owned by one or more stockholders, who elect a board of directors to manage the business. Officers may be elected by the board to manage the daily affairs of the business. A major benefit of a corporation is that shareholders are not generally responsible for the liabilities of the corporation.

In most cases, a claim for breach of contract or personal injury could only be collected against the corporation and not the owners’ personal finances. Each corporation files its own tax return, pays its own taxes, and may be subject to state franchise taxes or other annual fees.

Tax rates for corporations are bracketed based on taxable income. Taxation of corporations and record-keeping requirements are sometimes factors that work against operating a new business as a corporation.

Limited Liability Companies

A business attorney in Tulsa can assist you with setting up a limited liability company (LLC), which is a very flexible and inexpensive structure to utilize for a business. An LLC features many of the advantages of a corporation without some of the complexities.

The LLC’s operating agreement outlines the percentages of ownership, methods of distribution of profit and loss, and voting powers. Taxation is selected by the LLC to be like that of a partnership, an S Corp, or a C Corp. Liability protection is a benefit to the owners and officers, and is similar to a corporation.

LLCs can be fairly easy to operate and do not require the same complicated record-keeping procedures that apply to corporations.

Contact a Tulsa Business Attorney at Helton Law Firm Today

Ready to choose the right structure for your business? Contact Helton Law Firm at (918) 928-8941 to speak with an experienced business lawyer in Tulsa and get the guidance you need to protect your future.