What are the basic choices for a business Entity?
The most basic form is a sole proprietorship. This is a business owned directly by one person. It legally and financially coincides with its owner. This means that it is invisible for tax purposes – whatever comes in, or goes out, appears on the owner’s personal tax returns. It also means the owner is totally liable for all debts. Next, there are general partnerships. A general partnership is a business owned directly by two or more people. Like a sole proprietorship, it is legally and financially equated to its owners. Financially, all of the profit or loss passes through to its owners, regardless of whether they take that money out of the business or not. And legally, all of the partners are liable for 100% of the business debts. QUESTION: Can you agree with your partners that only one of you will be liable for your share of the debts? ANSWER: Yes, you can, but that agreement isn’t binding on the creditors. They can look to you for 100% of the debt, and you have to find, and collect
