Your Legal Companion

PART 1

1. Business Entity Basics

• Why Your Choice of Entity Matters
• Sole Proprietorships
• General Partnerships
• Limited Liability Companies (LLCs)
• Corporations
• S Corporations
• Special Business Entities: Limited Partnerships, Entities for Professional Businesses, Benefit Corporations, and Series LLCs

2. Personal Liability Concerns

• How Your Choice of Business Entity Affects Personal Liability
• Using Insurance to Limit Liability

3. Forming and Running Your Business

• Forming and Running a Sole Proprietorship
• Forming and Running a Partnership
• Forming and Running an LLC
• Forming and Running a Corporation
• Form Your Own LLC or Corporation

4. Money Issues: Taxes, Profits, Losses, and Investments

• Taxes
• Paying Out Profits
• Start-Up Losses
• Private Investors: Angels and Venture Capitalists (VCs)
• LLC or Corporation Comparison Table

5. Choosing the Right Business Entity: Four Business Stories

• Gabby’s Gears: Sole Proprietorship, Single-Member LLC, or Single-Owner Corporation?
• Fast Food Fusion: A Two-Owner Start-Up Business Chooses a Business Form
• Soaring Duck Machines Seeks a Different Tax and Ownership Structure
• SerMin Technologies: Forming a Tech Startup

PART 2

6. Converting a Sole Proprietorship to Another Entity

• Converting a Sole Proprietorship to a Partnership
• Converting a Sole Proprietorship to an LLC
• Converting a Sole Proprietorship to a Corporation

7. Converting a Partnership to Another Entity

• Converting a Partnership to a Sole Proprietorship
• Converting a Partnership to an LLC
• Converting a Partnership to a Corporation

8. Converting an LLC to Another Entity

• Converting an LLC to a Corporation
• Converting a Multi-Member LLC to a Single-Member LLC
• Converting a Single-Member LLC to a Multi-Member LLC

9. Converting, Dissolving, and Selling a Corporation

• Converting a C Corporation to an S Corporation
• Liquidating and Dissolving a Corporation
• Selling a Corporation

PART 3

10. Doing Business Out of State

• Doing Business Out of State
• Qualifying to Do Business
• Paying and Collecting Taxes in Other States
• Internet Issues

Appendix: State Website Information

• State Business Entity Filing Websites
• State Tax Office Websites
• State Securities Office Websites

Index

Your Legal Companion

One of the most important choices you make when starting a business (whether by yourself or with others) is whether a limited liability company (LLC) or corporation will best meet your needs. Or perhaps you’ve already organized your business but want to explore the possibility of converting to a business entity with more favorable legal and tax characteristics.

In both cases, this book will help you with your decision.

Although the focus of this book is on choosing whether to form an LLC or corporation, it’s helpful to know about the other two leading business forms (sole proprietorships and partnerships) and how they compare to LLCs and corporations. This book explains the legal and tax characteristics of each of these business entities and the basic rules for converting one type of business to another.

This book also provides information about S corporations as a tax choice for corporations (and LLCs to a much lesser extent), along with special entity choices for professional businesses.

I’ve divided this book into three parts.

Part One discusses basic information about each type of business entity. It includes the following chapters:

• Chapter 1 discusses each type of business entity, including the relative advantages and disadvantages of each.
• Chapter 2 explains how your choice of entities affects your personal liability for debts against your business.
• Chapter 3 examines the relative ease with which each of the entities can be formed and managed.
• Chapter 4 covers how each entity deals with profits, losses, investments, and taxes.
• Chapter 5 provides case studies of LLC or corporation choices for four different businesses.

Part Two includes the following chapters:

• Chapter 6 discusses converting a sole proprietorship to another entity.
• Chapter 7 discusses converting a partnership to another entity.
• Chapter 9 discusses converting a corporation to another entity, and reorganizing or dissolving a corporation.

Part Three discusses doing business out of state:

• Chapter 10 is a bonus chapter on qualifying to do business and paying taxes in other states.

This book includes links you can use to find information regarding your state’s corporate and LLC rules, as well as tax and securities laws information (see the appendix).

Business law and tax rules can get a bit complicated. Don’t worry. They’re presented here in plain language, with as little legal and tax jargon as possible, and with red flags for when you should consider getting help from legal and tax professionals.

By the time you finish this book, you’ll understand what each type of entity has to offer, and you’ll be ready to choose the right structure for your company. By the way, Nolo (www.nolo.com), the publisher of this book, provides many ways to assist you when it comes to corporations and LLCs, including assistance with state filings, helpful books, and lots of free information. Go to www.nolo.com and visit the “Business Formation” area.

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