If you are a small business owner, or considering starting your own business, it has always been important to know your options for incorporation. The uncertainty and financial stresses of COVID-19 and the subsequent recession make decisions about incorporation even more important.
In this article, we will review two common types of incorporation for small businesses: limited liability partnerships (LLPs) and limited liability corporations (LLCs)
Limited Liability Partnerships (LLPs)
In a limited liability partnership there must be more than one incorporating partner. Each of these partners (called “members”) receive personal liability protection as a result of incorporating.
Governance of an LLP is shared equally among all members, as are profits and losses, like a general partnership. An LLP is also taxed like a general partnership.
In some states, only certain professionals like doctors and lawyers may form limited liability partnerships. This is not the case in the Commonwealth of Massachusetts.
Limited Liability Corporations (LLCs)
A limited liability corporation may have one or more members. Like an LLP, it grants With the option to incorporate with only one member, an LLC may be an attractive solution for a sole proprietor looking to limit personal liability.
If an LLC has one member, it is taxed as a sole proprietorship. An LLC with multiple members is taxed as a general partnership by default. An LLC with any number of members may choose to be taxed as a corporation.
An LLC offers flexibility in governance as well, with governing bodies and processes specified in the incorporation paperwork.
Which Is Right for My Business?
In addition to LLPs and LLCs, there are several other types of incorporation available to business owners. When choosing how to incorporate, it is important to have a partner who knows the law, knows business, and knows your specific needs. Call our office today to schedule a consultation. We can help you identify your needs and the best type of incorporation for your business, file paperwork, and address your business’s other legal needs.