RUNNING HEAD: THE RIGHT KIND OF CORPORATION

Choosing the right kind of corpor tion for !o"r #"siness Toni C"nningh $ %U&'(): *eg + En,iron$ent -NAF./)0C1 Instr"ctor: 2 rk A3 Cohen 4 n" r! .56 7)./

THE RIGHT KIND OF CORPORATION

Choosing the right kind of corporation for your business If !o" re n entreprene"r th n it is ine,it #+e6 the decision 8i++ co$e "p6 to incorpor te or not to incorpor te3 It is ,er! serio"s decision nd #ec "se there re se,er + 8 !s to incorpor te +itt+e rese rch needs to #e done3 This p per 8i++ co,er ++ the risk tt ched to e ch t!pe of corpor tion nd it 8i++ co,er the risk if person decides to #eco$e so+e proprietor nd does not incorpor te3 The p per 8i++ not go deep into the corpor tion9s responsi#i+it! #"t it 8i++ disc"ss the risk nd ho8 to co,er the t :es if t :es #eco$e d"e3 ;itho"t ss"$ing th t e,er!one kno8s 8h t so+e proprietor is6 the pro to this t!pe of #"siness is <!o" h ,e the f"++ responsi#i+it! for the #"siness= nd the con is <!o" h ,e the f"++ responsi#i+it! for the #"siness= if this is the #"siness t!pe of choice then the person 8ho o8ns this t!pe of #"siness h s ++ the responsi#i+it! nd ++ the risk th t goes +ong 8ith it -&ocr tes 7))'13 There re other t!pes of #"siness th t 8here the responsi#i+it! nd risk c n #e sh red th t 8o"+d #e Gener + P rtnership 8here s t8o or $ore peop+e going into #"siness together nd n gree$ent is est #+ished th t specific ++! st tes ho8 the #"siness 8i++ #e sh red -&ocr tes 7))'13 There is nother p rtnership th t is +itt+e different fro$ the Gener + P rtnership6 this 8o"+d #e the *i$ited P rtnership3 In this p rtnership there is gener + p rtner 8ho r"ns nd $ n ges e,er! spect of the d ! to d ! of the #"siness the +i$ited p rtners re "s" ++! si+ent in,estors 8ho re >"st in it for the profit3 The gener + p rtner in this rr nge$ent h s $ore risk th n e,er!one e+se6 the si+ent or +i$ited p rtners 8i++ on+! #e t risk "p to the $o"nt in 8hich the! in,ested3 This is ho8 person c n o#t in

THE RIGHT KIND OF CORPORATION in,estors6 si$p+! #ec "se the in,estors 8i++ on+! +ose 8h t the! #ro"ght to the p rt! no $ore? no +ess -&ocr tes 7))'13 If ++e,i ting risk is 8h! so$eone is +ooking into incorpor ting6 then $ !#e n & Corp or C Corp 8i++ #e their choice3 Using either of these 8i++ #+ock ++ person + propert! fro$ the risk th t h s #een spoken #o"t 8ith the other t!pes of corpor tions nd once the decision is $ de s to 8hich one !o" re choosing then the #enefits 8i++ #e pp+ied3 ;ith the C Corp the #"siness st nds +one it is n entit! th t is tot ++! sep r te fro$ the peop+e 8ho o8n the$6 #"t nd there is +8 !s #"t >"st +ike the other corpor tions if !o" co@sign for +o n for the corpor tion !o"r person + ssets 8i++ #e once g in tt ched to the #"siness nd there 8i++ #e risk to the person + things th t 8ere protected -&ocr tes 7))'13 ;ith the C Corp .)/) nd sched"+e C $"st #e fi+ed in order to p ! the nn" + t :es th t $ ! #e d"e -&e A"ist6 7).713

The risk is the s $e 8ith the & Corpor tion the difference is th t 8hen this t!pe of corpor tion is est #+ished the peop+e in,o+,ed 8i++ not #e effected #! do"#+e t : tion6 8ithin this org niB tion the s $e p ss thro"gh th t occ"rs in the p rtnership occ"rs here +so 8hich +ot of peop+e 8 nt the option to fi+e t :es s n e$p+o!ee of the #"siness inste d of the o8ner of the #"siness th t 8 s the! 8i++ not h ,e to +ook for the +osses6 nor do the! h ,e to tr ck the co$p nies 8ins or +oses6 ++ !o" h ,e to 8orr! #o"t is fi+ing 8ith .)/) nd 8riting off 8h te,er !o" see fit3 The p rtnerships nd the so+e proprietor 8i++ fi+e t :es the s $e 8 ! .)/) for$ is ++ th t is needed -&ocr tes 7))'13 One $ore option th t is re ++! not corpor tion6 #"t it does #+ock the person + risk +so nd ssist $ n! 8ith their fi++ing of t :es3 There is #"siness for$ tion th t $ n! peop+e "se tod ! it is the *i$ited *i #i+it! Co$p n! -**C13 The **C e,en tho"gh

THE RIGHT KIND OF CORPORATION it is not corpor tion6 it is #"siness entit! th t offers so$e of the #enefits gi,en #! the

p rtnerships6 the so+e proprietor6 nd the corpor tions3 This is one of the f ,orites #ec "se it is the #est of #oth 8or+ds3 There is no person + risk tt ched nd the peop+e 8ithin this #"siness t!pe get to h nd+e their o8n t :es indi,id" ++! nd the co$p n! p !s no t :es3 ;ith this t!pe of #"siness no #o rd is needed on+! $ n gers 8hich c n #e those in,o+,ed in the #"siness3 One con is th t #ec "se ++ the $e$#ers re seen s indi,id" +s co"p+e $ ! h ,e h rd ti$e doing their t :es together -&ocr tes 7))'13 There is so $"ch $ore to +e rn #o"t these entities nd it is ,er! i$port nt to do the rese rch #efore se+ecting3 Person ++! <F"++ Circ+e In ho$e c $e= nd <A Pe ce of 2ind ho$e c re= f ++ "nder Corpor tion C entit! c ++ed C@%E He dA" rters6 Inc nd O"rA"est *ogistics is **C #oth of these entities set p+ ce 8here one kno8s th t the risk 8i++ ne,er tt ch 8h t person ++! #e+ongs to the$ nd the IR& h s set #"nch of g"ide+ines to $ ke s"re if !o" f ++ "nder cert in $o"nt ref"nd is +$ost g" r nteed3 Choosing to incorpor te is the e s! p rt6 deciding ho8 to incorpor te no8 th t is 8here !o" 8ork #egins3 -&ee the $ tri: #e+o8 to see the risk tt ched to e ch entit!1

THE RIGHT KIND OF CORPORATION

In the $ tri: #e+o8 see the risk th t the #"sinesses $ ! #e responsi#+e for if the! 8ere s"ed for #re ch of contr ct3 *ooking t the Tinker9s #"sinesses !o" c n c+e r+! see 8hich #"siness t!pe 8o"+d #e responsi#+e for e,er!thing 8ithin the #"siness nd ho8 their person + propert! $ ! #e tt ched to the + 8s"it3

-&e A"ist6 7).713

THE RIGHT KIND OF CORPORATION Reference: &e A"ist6 G3 -7).713 Business law for managers. & n Diego6 CA: %ridgepoint

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Ed"c tion6 Inc3This te:t is Conste++ tionE co"rse digit + $ teri +s -CD21 tit+e3 &ocr tes -7))'13 Are Co" Re d! to Incorpor teF &ocr tes 2edi 6 **C3 ISBN G(5.DGD/'7/(0