Welcome to the 2008 Small Business Development

Workshops

Burton A. Brown, a HACIA memberThe Law Offices of Burton A. Brown

205 W. Wacker Dr., Suite 922Chicago, IL 60606

(312) 236-5582

Business Formation & Incorporation

Business Formation & Incorporation

THE ANATOMY OF AN ENTITY• Different Types of Entities• Structure• Pros & Cons• Registration

Business Formation & Incorporation

Different Types of Entities

• Sole Proprietorship• Partnership• Corporation• Limited Liability Company (LLC)• Limited Liability Partnership (LLP)

SOLE PROPRIETORSHIP

A business in which one person owns all the assets, owes all the liabilities and operates in his or her personal capacity.

SOLE PROPRIETORSHIP

PROS• Full Management Authority

“You are your own Boss.”• Limited legal expense• Minimal Formalities and

Regulatory and Reporting Requirements

CONS• Unlimited Liability: Owner is

solely responsible for all debts and obligations

• No diversity in management• Limited ability to Raise

Capital

PARTNERSHIP

A voluntary association of two or more persons who jointly owns and carry on a business for profit.

Under the Uniform Partnership Act, a partnership is presumed to exist if the persons agree to share proportionally the business’s profits or losses.

PARTNERSHIP

PROS• All partners are entitled to

manage the partnership equally

• Minimal formalities and regulatory and reporting requirements

• Low cost of Organization

CONS• Unlimited Liability• Partnership can cause

problems when partners disagree on fundamental issues

• Limited ability to raise capital

CORPORATION

An entity having authority under law to act as a single person distinct from the shareholders who own it and having rights to issue stock and exit indefinitely.

CORPORATION

PROS• Limited Liability for

Shareholders• Business continuity• Ability to raise capital• Centralized management

- Shareholders- Board of Directors- Officers/ Managers

CONS• Increased legal expenses• Corporate Formalities and

Reporting Requirements:- Annual Report- Annual Corporate Minutes

• Double Taxation- Corporate income- Shareholders: Pay taxes on income & dividends

LIMITED LIABILITY COMPANY (LLC)

A company – statutorily authorized in certain states – that is characterized by limited liability, management by members or managers, and limitations on ownership transfer.

LIMITED LIABILITY COMPANY (LLC)

PROS• Limited Liability for all

owners• Unrestrictive ownership• Ability to raise capital for

business• Beneficial tax treatment• Flexibility of management

CONS• Higher Legal Expenses• Limited Transferability of

Ownership• Possibility of Piercing the

LLC Veil• Strict Formalities and

Reporting Requirements- Articles of Organization- Annual Reports

LIMITED LIABILITY PARTNERSHIP (LLP)

A partnership in which a partner is not liable for a negligent act committed by another partner or by an employee not under the partner’s supervision.

LIMITED LIABILITY PARTNERSHIP (LLP)

PROS• Limited Liability• Business Continuity• Diversified Capital

Resources

CONS• Operating Agreement• General Partner• Higher Legal and

Organizational Expenses• Strict Formalities and

Regulatory and Reporting Requirements

Registration & Recording

• Secretary of State- Forms- Fees

• Recorder of Deed Office- Fees

How to Decide Which Entity is Best for You

• Conference with your Accountant & Attorney• Discuss:

- Present- Near Future- Future

• Cost Effective

To Be Continued…

Thank You for Joining Us.

Law Offices of Burton A. BrownBurton A. Brow, a HACIA memberStephen SpiegelPatty RodriguezMaria Hernandez