At Mohajery & Associates, PC, we can help you to decide which form of business is best for you and, once that decision is made, to take all of the steps necessary to help you accomplish that business formation.
A sole proprietorship is the simplest form of business. From a legal standpoint, the sole proprietor is personally responsible for the liabilities of the business, and the sole proprietor's personal assets are, therefore, at risk. If the sole proprietor wishes to protect his/her personal assets, it is advisable to procure insurance sufficient to cover any potential liabilities. In some instances, a homeowner's policy or an umbrella policy may provide some protection for the sole proprietor.
A partnership is an entity formed by two or more individuals or entities and, from a liability standpoint, can be risky because the liability of each partner is what is known as "joint and several;" i.e., each partner is personally liable not only for his or her own acts, but for the acts of each of the other partners, as well. While indemnification or other protection from this potential liability can be covered in a partnership agreement, it should be a priority to learn all one can about the financial status of each of the other partners before entering into a partnership. The partnership agreement may, indeed, provide that if you must pay for the fault of another partner, the partner at fault must pay you back; but, if the other partner does not have the resources to pay you back, then such an indemnification is not worth more than the paper on which it is printed. As with the sole proprietorship, adequate insurance is vital.
The corporate form is probably the most familiar to us. Shareholders, directors and officers are practically household terms. Once formed, a corporation is a legally-recognized 'person' in the eyes of the law and, through its shareholders, directors and officers, can do just about anything a person can do. Shareholders, directors and officers are not personally responsible for the liabilities of the corporation so long as they are acting within the course and scope of their fiduciary duties to the corporation.
Limited Liability Company.
A more recently recognized form of business is the limited liability company, or LLC. Like a corporation, the LLC is a legally-recognized 'person' in the eyes of the law; and, like a corporation, through its members and/or managers, can do just about anything a person can do. The members/managers of an LLC are not personally responsible for the liabilities of the LLC so long as they are acting within the course and scope of their fiduciary duties to the limited liability company.