LLC or Sole Proprietorship? What’s the best way to go?
LLC or Sole Proprietorship? What’s the best way to go?
The two most popular legal forms of organization are Sole Proprietorship/S.P. and Limited Liability Company/L.L.C. We decided to shed some light on what’s the difference and what to choose.
Sole Proprietorship (L.P.)S.P., or Sole Proprietorship is a company that is owned by a single individual on a private ownership basis or by his family members on a shared ownership basis. An S.P. can be formed using private or family assets, as well as using sources that are not directly prohibited by the state. The S.P. has no legal distinction between the owner and the business entity. The entrepreneur - owner of the S.P. - carries the financial responsibility for all debts and/or losses suffered by the business, to the extent of using personal or other assets, with an exception of assets that cannot be traced as per the active law. Similarly, members of the owner’s family bear the full and unlimited responsibility for the business’s liabilities with all their assets excluding the ones protected by law, as mentioned above.
Limited Liability Company (L.L.C.) L.L.C. is a commercial company incorporated in a legal entity with a shared capital divided into shares according to the constituent document and with obligations that are guaranteed by the property of the company. L.L.C. can be founded by both a single individual and a group people with shared interests. These agree to share certain assets of the company in order to carry out the entrepreneurial activity and gain profit. L.L.C. associates do not carry out the liabilities of the company personally and only bear the risk of its activity within the limits of its shareholding. In other words, all the obligations of an L.L.C. Is paid only from the property of the L.L.C. So, S.P. or L.L.C? If you’re still choosing, keep in mind that: 1.The individual entrepreneur is responsible for all the S.P.’s liabilities with his personal property, excluding the property protected by law; 2.It’s harder for an S.P. to attract investments and loans; 3.The entrepreneur is solely responsible for the S.P.’s accounting and financial reporting, while an L.L.C. is overviewed and controlled by governmental regulations and bodies; 4.An L.L.C. is obligated to double-entry bookkeeping against the more simple single-account bookkeeping applicable to all S.P.s.
Of course, there are many other legal forms of organization aside from L.L.C. and S.P. We will shortly go over some of them below: •Joint Stock Company/J.S.C. In this legal form of organization the company’s shared capital is divided into shares and the liabilities are guaranteed by the company’s property. The company property is the result of it’s actions, financial activity, as well as any other sources in accordance with the legislation. The company has the right to own it’s property and it is not shared in any way with the shareholders’ assets. The company can be established by a single individual or a group of individuals. This is done by submitting a registration statement to the respective government body.
•Business cooperative A cooperative is formed when individuals contribute their resources to gain profit through a jointly-owned company. By way of derogation from this provision, members of the agricultural cooperative may be persons who produce agricultural products in auxiliary households. The entrepreneurial cooperative is a legal entity with 5 or more members. Membership may be held by an individual from the age of 16 and a legal entity.
•Production cooperative an enterprise set up for the purpose of carrying out jointly the production activity and other economic activity, based mainly on the personal work of its members and on the co-operation of the shares of its shared capital. The production cooperative is a private-law enterprise with a commercial goal. The cooperative is a legal entity with 5 or more members, which may be individuals from the age of 16 and other legal entities.
•Collective enterprise A collective enterprise is founded by two or more legal entities and/or individuals that have pooled their assets to establish a common entrepreneurial activity under the shared company’s name and based on a constitutive contract signed by all sides. There may not be less than 2 or more than 20 associates in form of legal entities or individuals. A legal entity or individual may be an associate of only 1 collective enterprise.
•Limited partnership A limited partnership is a form of legal organization that is created when two more partners unite to conduct business activity under the same company’s name based on the constitutive contract signed by all sides. Unlike in cooperatives and collective enterprises, companies may become limited partners without direct participation in the company’s activity. The partners are only responsible for the company’s liabilities based on the size of their initial share/investment. Regardless of the legal form of activity you choose, Virtual Office can not only help you get started, but provide an easy way to success. Our dedicated team of expert will take care of all your legal necessities leaving your to think about the bigger picture.
In accordance with the active law, an individual has the right to do business in the form of an S.P. without registering a legal entity as long as he has registered the S.P.