Legal Question in Business Law in Indiana

Dear New Business Owner:

Here';s a page from my notebook:

LEGALLY SPEAKING�... BASIC BUSINESS ORGANIZATION

By: J. Norman Stark, ATTORNEY, ARCHITECT EMERITUS (Oh, A.I.A., N.C.A.R.B.)

Query: What are the basic forms of business organization?

Answer: Modern business organizations are formed and operate in many forms, selectively organized to accommodate the nature and extent of business and geographic operations. Historically, most privately-owned businesses were organized and operated as individual proprietorships, also known as "Mom and Pop Shops". As the need for expansion of business developed, many ordinary partnerships were formed between two or more individuals. The corporate form of business came into existence as the need for more complex organization, industry, finance and operations with mass employment, required immunity from personal liability.

In the mid-1990�s a new form of business organization, the limited liability company (LLC) was recognized in Ohio, as in many other states. This entity combined many of the more favorable aspects of the partnership and the corporation, while excluding many of the less favorable features of other business forms. An increasing number of business owners found the LLC a suitable entity choice for their business operations.

While individual proprietorships and partnerships offered no immunity from liability for debt or duty, the limited liability company, like a corporation, did provide greater immunity, as an artificial being at law, and a legal entity separate from its individual members. LLC's may be formed by one, two or more individuals, members or entities, and the members of the LLC may themselves be a separate legal entity, such as a partnership, corporation, association or trust, also offering the major tax advantage that a partnership does and a corporation does not. That is, taxation on profits is only at the individual level, and not also at the company level. Consequently, profits in a limited liability company avoid being taxed twice, the way they are in a corporation.

In corporations, owners (shareholders) are only liable up to the limits of their investment. In a partnership, partners have unlimited liability for contracts entered into, and for the wrongful acts committed by other partners. The LLC members, however, have only the liability that a corporate owner does, up to the amount of their individual investment in the corporation. A member of a limited liability company (LLC) may manage as actively as desired, while still maintaining the limited liability protection under the law. Selection of a specific business entity form, and the contracts for it, should be made with the assistance and guidance of experienced legal counsel, in order to maximize the benefits available under the law, while minimizing risk and liability for individuals.

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�WHERE EXPERIENCE COUNTS, COUNT ON MY EXPERIENCE�

J. NORMAN STARK, ATTORNEY*

ARCHITECT EMERITUS (Ohio) A.I.A., N.C.A.R.B.

1109 Carnegie Avenue Cleveland, Ohio 44115

(216) 531-5310 x7100 Cel.:(216) 310-7100 Email: [email protected]

*Author: The Construction Claims Investigation Worklist�

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