What Is Legal Status and Ownership

A legal entity is a commercial organization that is legally authorized to enter into a contract, including a contract for the purchase, sale or rental of real estate. Corporations may be owned by individuals, owned by another legal entity, or held in trust. Some of the most common legal entities that own real estate in California include: There can be many different variations of the partnership theme, depending on the activity of your partners. You may have general partners who are involved in the management, financing and liability of the business, or you may have limited partners who do not play an active role in the management of the business, but whose liability is limited to their investment. More information about limited partnerships will be discussed later in Business Builder. Nor do partnerships necessarily have to be divided equally. It is perfectly legitimate for a partner to have a majority stake. Starting a business requires not only knowledge of your business, but also an understanding of local, state, and federal laws. Today, there are many reasons for small business owner-operators to examine the legal structure of their business. Changing laws and capital requirements are just two of the many factors why owner-operators need to carefully consider the legal structures that best meet their needs. This business builder provides you with the information you need to determine the best business structure for you.

For new businesses that might fall into two or more of these categories, it is not always easy to decide which structure to choose. You need to consider your startup`s financial needs, risks, and ability to grow. It can be difficult to change your legal structure after registering your business, so analyze it carefully in the early stages of starting your business. For more information about ownership structure, see the following articles: The law treats a corporation as a separate entity from its owners. He has his own legal rights, regardless of who owns it – he can sue, be sued, own and sell property, and sell property rights in the form of shares. Business filing fees vary by state and fee category. For example, in New York, S Corporation and C Corporation`s fee is $130, while the non-profit fee is $75. As a sole proprietorship, the company is owned and operated by one person – you! You don`t have partners to consult with or boards to report to. The law recognizes you and the company as one man. The company is you; They are the ones who are the business. And it is this single entity status that is responsible for the advantages of creating as a sole proprietor and also for the disadvantages.

Legal and real estate structures, company size and industry are not completely independent of each other. For example, most sole proprietors tend to be small businesses, not least because a single person rarely has the financial capacity to finance a very large business, nor the desire to be personally responsible for everything they own if a large business runs into financial difficulties. Some industries need big companies. For example, it is not profitable to operate a small steel mill because the physical and financial investment required is very important. In other cases, the sector and the legal form are closely linked. For example, law firms and certain other professional services firms where more than one professional works in the UK are required by law to be formed as partnerships and no other property or legal structure is permitted. A limited liability company (LLC) is a hybrid structure that allows owners, partners or shareholders to limit their personal liabilities while enjoying the tax and flexibility benefits of a partnership. Under an LLC, members are protected from personal liability for the company`s debts unless it can be proven that they acted illegally, unethically, or irresponsibly in carrying out the corporation`s business. The ownership structure concerns the internal organization of a business entity and the rights and obligations of persons who have a legal or reasonable interest in that entity.

As the owner of the business unit, it is important to understand how the ownership structure of a particular business unit is organized and what this means for the rights of the owners. As a small business owner, you need to play many roles to keep the business running smoothly and properly. However, there are times when you shouldn`t try to be a lawyer, accountant, marketer, foreman, salesperson, etc. Instead, take advantage of the professional advice that is so readily available. A good lawyer, or CPA, can help you interpret the many legal and technical issues related to one or all of the legal structures of businesses. Your time and money savings for hiring a professional advisor can more than offset the potential cost of missteps and misturns when choosing your company`s business structure. Since laws are constantly changing, it`s best to consult a lawyer or accountant for the latest regulations and requirements before deciding on the right business structure for you. We`ve rounded up the most common types of business units and their notable features to help you choose the best legal form for your business.

To intelligently choose the legal structure of your business, you need to know the alternatives you can choose from. A business can be structured in different ways; However, the law classifies companies in such a way that most fall into one of three legal forms. These are as follows: Although small businesses can be LLCs, some large companies choose this legal structure. An example of LLC is Anheuser-Busch Companies, one of the leading companies in the U.S. brewing industry. Anheuser-Busch, headquartered in St. Louis, Missouri, is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewery based in Leuven, Belgium. The simplest (and least amount of paperwork) of all legal business structures is sole proprietorship.

To start a sole proprietorship, you need a good idea, a lot of determination, and an infinite reserve of energy for the hard work ahead. However, the only documents you`ll need are those required to submit a fictitious name (if you decide not to use your own) and the licenses you`ll need to start operating. You don`t have to take formal steps to set up a sole proprietorship. Therefore, there is no need to hire professionals to submit the necessary government documents to help you get started. You do everything yourself! The possible disadvantages of company S status must also be taken into account. The taxable income of an S corporation is taxed to shareholders, even if the income is not effectively distributed to them. If a company`s cash flow is uneven or uncertain, S status may not be the smartest choice. Finally, certain tax-deductible items for corporation C, such as the cost of certain ancillary services, are not deductible for corporation S.

In order to determine whether a legal person has undergone a change in control or ownership, the acquisition or transfer of ownership rights in the legal person shall be taken into account. « States have different requirements for different business structures, » Friedman said. « Depending on where you settle, there may also be different requirements at the municipal level. When choosing your structure, you understand the state and industry you are in. It`s not a one-size-fits-all solution, and businesses may not know what applies to them. « Here are some important factors to consider when choosing your company`s legal structure. You should also plan to consult your CPA. An example of this type of business is Google. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and made it the world`s first search engine.

The co-founders first met at Stanford University during their Ph.D. and then set off to develop a beta version of their search engine. Soon after, they raised $1 million from investors and Google received thousands of visitors a day. With a combined 16% stake in Google, they get a total net worth of nearly $46 billion. The legal forms and ownership of companies differ from country to country. In the United Kingdom, most (but not all) businesses are sole proprietors, limited liability companies or partnerships (UK Government, n.d.). Can you imagine a situation where ownership of the business unit has become an issue between the founders or co-owners of the companies? What was the basis for the dispute and what was the outcome? Liability: A corporation is an « immortal » legal entity, meaning it does not end with the death of the shareholder. The shareholders of the company have limited liability because they are not personally liable for the debts and obligations of the company. Shareholders cannot lose more money than the amount they have invested in the company.

Like the provisions of an LLC, shareholders must be careful not to « penetrate the corporate veil. » Personal checking accounts should not be used for business purposes and the company name should always be used when interacting with customers.