Your Legal Companion

One of the most important and difficult choices you make when starting a business (whether by yourself or with others) is trying to figure out whether a limited liability company (LLC) or corporation will best meet your needs. An equally difficult decision occurs if you have 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, you cannot make an informed decision without learning about all the types of business entities—including sole proprietorships, partnerships, 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 some of the less well known ways of structuring a business. For example, two legal spin-offs of the basic partnership form—the limited partnership and the registered limited liability partnership—are discussed. This book also covers S corporations, which have some characteristics of the more well known C corporation (including limited liability) but are taxed like a partnership.

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 examples of entity choices for various types of 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 8 discusses converting a limited liability company 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 explains how doing business out of state may affect your choice of entity.

This book also 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 real-life contexts, without off-putting legal or tax jargon, and without the technicalities best left to 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. Visit the site and click “Business Formation,” on the left side of the home page.