Deciding on the legal form of business you want is an important part of setting up a business that will thrive. Your decision should be based on issues of liability exposure, taxes, future expansion plans and the number of owners involved. The legal form you choose will affect the future of your business in a myriad of ways, so consulting an attorney, CPA, or financial consultant is an important step in the decision making process.
Below is a summary of some of the most common types of legal forms and what they mean:
Sole Proprietorship: This is the easiest type of business to form, and the individual will start the business in his or her own name. There is no distinction between personal and business activities.
Partnership: This will entail a relationship between two or more people who join to carry on a trade or business. Each person will contribute money, property, labor, or skill and expects to share in the profits and/or losses of the business. It is strongly recommended (but not required) to form a formal, written partnership.
Corporations: There are several basic steps to creating a corporation:
– Reserve the corporate name
– Once you receive a written notice, you have 90 days to complete the incorporation
– File the articles of incorporation
– Complete the transmittal form
– Send articles, transmittal, and check to the Secretary of State’s Office
– Publish intent to incorporate in the county’s official paper
– Hold organizational meeting
o Adopt by-laws
o Elect directors
o Elect officers
o Issue stock
There are several “corporate kits” you can use to help you form a corporation, but legal counsel is always recommended. In order to register your business as a corporation, you must contact the Georgia Secretary of State, Corporations Division, at 404-656-2817. Corporations are subject to an annual registration with the Secretary of State which costs a small fee and is required by April 1 each year.
To form an “S” Corporation, you must file IRS Form 2553 within 75 days of incorporation. Limited Liability Company (LLC): This legal form of business combines elements of a “C” corporation and a partnership.
