Business Formation in Georgia: Part I
Business owners have many different options when deciding how to organize his or her business. There are advantages and disadvantages to each form of business organization, which makes it wise to consult with a business attorney before making a final decision. A business attorney can help business owners to properly form a corporation, or organize a limited liability company, and explain the required steps you need to know in order to keep your business in good legal standing. There is far more to forming any business than filing the articles of organization or articles of incorporation. This article series will provide a brief overview of some of the different forms a business can take. In part I, we will discuss a brief overview of business organization in general before expanding the discussion on sole proprietorships and partnerships. Part II of this series will focus on corporations and limited liability companies.
For experienced advice on what might suit you best as you move forward in your own business venture, contact an experienced business law attorney at the Forsythe Law Firm.
Business Organization
The most common forms of business organization are:
- sole proprietorship;
- partnership;
- corporation; and
- limited liability company.
There are layers and different subcategories within some of these categories as well. And from the standpoint of federal income tax, there are three principal business formations: which are:
- Subchapter C corporation;
- Subchapter S corporation; and
- Partnership
Choosing the form of organization that is right for you can be complicated because federal income tax law does not exactly match state law.
Sole Proprietorship
The sole proprietorship, or individual ownership, is perhaps the oldest and most purely understood form of business. The sole proprietorship has only one owner. Sole proprietorships are very common, and offer the advantage of low interference in the form of bureaucracies. However, as the lone owner their ability to obtain credit will be limited to their own financial resources. The sole proprietor of a business also retains unlimited liability for obligations of that business. All of the income and deductions generated by the business belong solely to that one owner.
Partnerships
In business, a partnership might be a “general partnership,” or a “limited partnership.”
In a general partnership, two or more people run the business as co-owners. Unless a written partnership agreement supersedes the presumption, in a partnership each partner has an equal voice in the management of the business. Each partner is personally liable for all of the obligations of the business: including liabilities from the acts of another partner. Partnerships benefit from certain tax benefits and from having at their disposal the talents and resources of more than one owner. However, operation of the business can become more complex with the addition of each partner.
Limited partnerships in Georgia must be formed in accordance with the “Georgia Revised Uniform Limited Partnership Act.” Limited partners have different rights and liabilities than general partners, and are not liable for the obligations of the limited partnership. The main purpose of a limited partnership is to allow a limited partner to invest in the business without risking more than the capital investment they contribute.
Contact the Forsythe Law Firm
Reach out to an experienced Atlanta small business attorney at the Forsythe Law Firm for help with all of your legal business needs.
Sources:
sos.ga.gov/corporations-division-georgia-secretary-states-office
dor.georgia.gov/taxes/register-new-business-georgia
