Every form of business operates under a legal structure governed by the rule of law. Regulations are meant to ensure that business practices are carried out within the confines of the law. In the various transactions of a business, there are also laws that monitor and outline the mode of operation, and that is why it is prudent for an organization to have a business attorney that will ensure adhering of all state and federal regulations. Also, contractual agreements with other parties are to avoid possible future conflicts. When deciding to establish a business, you need to consider the type of venture you want to operate and the business transaction law Manchester NH therein.
TYPES OF LEGAL STRUCTURES
- SOLE PROPRIETORSHIP
This structure of business is the least regulated due to its small capacity, thus, the legal start-up costs are minimal. In this type of business one person owns and operates the company and the owner registers their name to get a local license of operation. The profits and incomes form the venture are taxed as personal income. The disadvantage of this form of business is the unlimited personal liability that is to mean, the owner can never detach themselves from any losses arising from business operations, and they are liable for any financial debts.
This kind of two or more parties come together to own and operate a business. There are two forms of alliances, general partnerships; where the partners who manage the business assume the responsibility of debts and other legal duties arising from the operations of the market. The other type is a limited partnership who are those parties in the organization that act as investors only. Their liability is limited which means their business operations do not affect their assets.
- LIMITED LIABILITY COMPANY
This type of business operates like combination of a sole proprietorship and a partnership it is a legal entity on itself. Meaning, the members of such a corporation have their assets protected in case of losses arising from the business, and on the other hand, they enjoy their profits and incomes from the venture which are taxed as personal incomes. The legal requirement for such an investment is, the members to establish an Operating Agreement which would outline the sharing of profits and losses and any other type of internal arrangements.
A corporation is a large organization or group of companies that has the legal capacity to operate as separate entity distinct from its owners and is guided by a team of officers known as a board of directors. The shareholders of corporations have a limited liability meaning, they are entitled to participate in earnings through dividends, but they are not held personally responsible for the company’s debts.
According to the taxation law, corporations are supposed to file form 1120 with the IRS every end of the year at December 31, with the salaries paid to the shareholders who are the employees being deducted, but the dividends are not deductible.