Small Business Formation and Operation
Romney Law Offices assists clients in evaluating which legal entity is most efficient and cost effective for the expected purposes and then drafts the documents necessary to establish it and operate it as a legal entity. In addition, Romney Law Offices serves as business counsel for day-to-day operations of these entities.
Limited Liability Company (LLC)
An LLC is a hybrid business entity that blends elements of partnership and corporate structures. Its main advantage over a partnership, as for the owners (shareholders) of a civil law corporation, is that the liability of the owners or members of an LLC its debts and obligations is limited to their financial investment. However, like a general partnership, members of an LLC have the right to participate in its management, and profit/losses flow through to its members.
An LLC is a hybrid business entity that blends elements of partnership and corporate structures. Its main advantage over a partnership, as for the owners (shareholders) of a civil law corporation, is that the liability of the owners or members of an LLC its debts and obligations is limited to their financial investment. However, like a general partnership, members of an LLC have the right to participate in its management, and profit/losses flow through to its members.
Certain types of businesses that provide professional services requiring a state professional license (legal, medical) may not form an LLC. For California income tax purposes, an LLC will be classified as a partnership if it has more than one owner and will be treated as a disregarded entity if it has only one member.
However, an LLC is allowed to elect to be treated (taxed) as a corporation. To be taxed as a corporation, the LLC files an election on Federal Form 8832, Entity Classification Election, with the IRS. California conforms to the federal entity classification regulations commonly known as "check-the-box regulations" that allow an LLC to elect to be taxed as a corporation.
Limited Liability Partnership (LLP)
An LLP is a form of ownership in which all the partners receive limited liability protection. However, an LLP is similar to a general partnership in that all the partners can take an active role in managing the day-to-day affairs of the business.
The LLP form of ownership is limited in the State of California to persons licensed to practice in the fields of public accountancy, law, or architecture. In addition, per recently chaptered SB 284, engineers and land surveyors are also included in the professions that can be formed as an LLP. In order to form in California, an LLP must first register with the California Secretary of State. An LLP formed in another state must register with the California Secretary of State prior to conducting business in the state.
An LLP is a form of ownership in which all the partners receive limited liability protection. However, an LLP is similar to a general partnership in that all the partners can take an active role in managing the day-to-day affairs of the business.
The LLP form of ownership is limited in the State of California to persons licensed to practice in the fields of public accountancy, law, or architecture. In addition, per recently chaptered SB 284, engineers and land surveyors are also included in the professions that can be formed as an LLP. In order to form in California, an LLP must first register with the California Secretary of State. An LLP formed in another state must register with the California Secretary of State prior to conducting business in the state.
Limited Partnership (LP)
Like shareholders in a corporation, limited partners have limited liability. This means that the limited partners have no management authority and are not liable (unless they obligate themselves by a separate contract such as a guaranty) for the partnership's debts.
The LP provides the limited partners a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General partners thus bear more economic risk, as in cases of financial loss, in which the GPs are personally liable.
Although limited partners are subject to the same alter-ego piercing theories as corporate shareholders, it's more difficult to pierce the limited partnership veil because LPs do not have many formalities to maintain. So long as the partnership and the members do not co-mingle funds, it would be difficult to pierce the veil.