choice of entity
DESCRIPTION
Tax, Liability, agency authority, and management in different types of business organization.TRANSCRIPT
What Business Entity Should I Use?
William A. PriceAttorney at LawGrowthlaw.com1-800-630-4780
Illinois Entity Types
For-Profit C Corporation S Corporation LLC LP RLLP Partnership
Nonprofit Nonprofit Corporation Religious Corporation Unincorporated
Association
Today's Focus: For Profit Entities
C Corporation S Corporation LLC LP Partnership
From Startup To IPO
Startup: Sole Proprietor LGOP (Little Group Of Parachutists/People):
Partnership Or Boss/Employees Or Fellow Students Or Brothers Or Mom & Pop
Initial Organization: Pass-Through Entity at Lowest Filing Fee, Local
Outside Investors, Private: Still Pass-through Lots of Owners: Franchises, Investors:
Probably Public (Though P/E Prefer Private)
Sole Proprietorship(Not A Business Entity)
Income Tax: IndividualFiling Fee: None
Personal Property Replacement Tax: NoneLiability for Business Expenses And Loss
Causation: All Proprietor AssetsAgency Authority: Proprietor
Management Authority: Proprietor
Mom & Pop Business
She Owns The Assets Keeps the Books May or May Not
Work In The Business
Inherits Everything
He Does or Runs The
Business Gets the customers Does what he's
told!
Mom & Pop
Share income and other tax liabilities/single level tax cheaper for joint filers
Separate ownership/liabilities or tenancy by the entireties to separate household from business risks
May share liabilities, if she's in business/all family assets in business
Marital property laws and divorce court, if disputes among owners
Assumed Business Name
Required if any except names of individuals used as business name
County Clerk Filings & Fees Newspaper published notices ($$$!) Annual renewal New filing/publication with every new
owner/location
General Partnership
The default business entity No filing fees to create Pass-through tax liability 1.5% Personal Property Replacement Tax General agency of partners Management by agreement
S Corporation
Requires state filing fees ($150) (Expedited $100 if online filing, more if walk-in service)
Franchise tax 0.0015 of stated capital (minimum $25)
Pass-through income tax treatment Personal property replacement tax 1.5% Agency authority in President Management by single class of
Shareholders/elect Board of Directors
C Corporation
Requires state filing fees ($150) (Expedited $100 if online filing, more if walk-in service)
Franchise tax 0.0015 of stated capital (minimum $25)
Entity level tax on retained earnings, individual on distributions
Personal property replacement tax 2.5% Agency authority in President Management by one or more classes of
Shareholders/elect Board of Directors
Limited Liability Company(My Baby!...)
Filing fee $500 Annual report $250
(Corp. $75) No franchise tax Pass-through tax Agency in Manager or
Members Management by
Members/Manager Class(es)
Your Entity Is RegisteredAre You Battle Ready?
Now That I've Got It, How Do I Use This Thing?
Capital Contributions Trademark and Business Name Income Accumulation Contracts With Suppliers and Customers Hold Intellectual Property
Capital Contributions
1. Proprietor Assets: House, Bank Account, Stocks, Physical Assets, IP
2. Friends and Family: IIT $250k, U of C $850k, here?
3. Outside investors (?angels? ?suppliers?
?customers?)
1. Private equity (VC, p/e funds for M&A)
2. Public Investments
What's In A Name?
Entity Name State Trademark Federal Trademark Domain Name(s) International Trademarks Policing The Mark: Lawyer Letters, Courts Policing The Mark: Takedown Notices, ICANN
Income Accumulation
C corporations can have excess accumulations tax
S corp/passthroughs might want to buy saleable assets that appreciate
EBITDA multiples are your sale value
Contracts With Suppliers and Customers
Suppliers Learn the ways of
the UCC Price vs Quality Noncircumvent
agreements Get extended pay
terms
Customers Under-promise,
overperform Recover your costs Airborne or Fedex? Get paid upfront,
early, every time
Intellectual Property “Work For Hire” is for employees: Own Your IP Define your deliverables Retain rights to your “Expedebits” Build Proprietary Products And Services Think About Business/Product Positioning Register Your Trademarks, Copyrights, and
Patents
Questions?
Choice of Entity? Startup Paperwork? Capital Formation? Name and Image? Contracts? Buy, Sell, Recap?
Thanks For Coming!