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choosing a business structure for your company has implications beyond just how you will file taxes the ramifications for your company's name range from legal administrative and financial businesses with more than one owner are usually organized as limited liability companies llcs or partnerships partnership versus llc that decision will have far-reaching consequences so let's break it down to determine the best structure for your company the fundamentals of partnership businesses with more than one owner are automatically considered partnerships in the states where the company is formed unless otherwise specified in the partnership agreement each partner owns an equal share of the company's assets and liabilities just like a sole proprietorship furthermore while no specific filing or registration procedures are required to form a partnership partnerships must still adhere to the permits licenses filing and tax requirements that apply to all businesses depending on how the company is structured and where it is based there are various types of partnerships partnership in general gp the general partnership is the most basic partnership structure it is simple to form and dissolve the business becomes official when two or more partners create and sign a formal partnership agreement there is no requirement to register with the state unless otherwise specified in the partnership agreement a general partnership divides ownership and profits equally similarly all partners have equal authority to make company decisions regarding contracts and financing furthermore each partner bears equal liability and is held accountable for the company's debts and legalities finally general partnership owners are not company employees instead they are the recipients of owner draws limited liability company lp limited partnerships unlike general partnerships must be registered with the state they must abide by state laws when it comes to information in a limited partnership agreement reserving an lp company name partner duties and annual reporting requirements limited partnerships are ideal for partners looking for investors but who do not want to deal with the more complex compliance issues that come with forming a corporation or llc limited partnerships are made up of at least one designated general partner and one or more limited partners the limited partners contribute money to the company but do not actively participate in its day-to-day operations the general partner is in charge of day-to-day operations furthermore the limited partners share in the company's profits but not its debts or liabilities ensuring that they never lose more than they invested limited liability company llp limited liability partnerships are not recognized in all states and some require the company to register as a professional limited liability partnership or pllp in essence a limited liability partnership is a type of business structure that is mostly used by professionals for example attorneys accountants physicians engineers dentists architects in addition the state usually requires all partners to be licensed in the same profession while the llp allows all partners to share equal responsibility it limits the partner's personal liabilities again the amount of personal liability protection varies from state to state in the real estate industry there is also a partnership known as the limited liability limited partnership llp all partners have limited risk in this structure which is advantageous for investor groups looking to build large hotels commercial buildings and apartment communities overall forming a partnership is a simple process with little paperwork and few regulations however a partnership can expose the owners to unnecessary risk and damaging personal liability because of these considerations many co-owners opt to form a limited liability company limited liability corporation llc llc the llc is a formal business structure a legal entity registered with the company's home state that is responsible for the rules and regulations that apply to llcs in that state unlike in a partnership llc owners are considered separate from the company and are not liable for the debts and liabilities of the company according to state doctrine llcs when formed correctly and compliance is maintained maintain their obligations regarding the businesses liabilities shielding owners from lawsuits and debt concerns owners in an llc are referred to as members most states according to the irs do not restrict ownership so members can include individuals corporations other llc's and foreign entities an llc can have an unlimited number of members and most states allow a single owner to form an llc in fact many sole proprietors form an llc to protect themselves from personal liability when there is more than one owner slash member the llc is called a multi-member llc and all members have the same liability protections the llc is essentially a cross between a partnership and a corporation the primary advantage as with the corporation is the owner slash member's limited liability as the name implies however there is a tax benefit which we will discuss later another advantage is the management flexibility of the llc depending on the company owner's preferences an llc can be member managed or manager managed the owner slash members of a member managed llc manage the day-to-day operations of the business manager managed llc the owner slash members appoint one or more managers to run the business unless the operating agreement specifies otherwise most states consider llcs to be member managed by default the following are the requirements for forming an llc in most states select and register a distinct business name the term llc should be included in the name complete and submit articles of organization form to the secretary of state because each state has its own document to fill out and file it may be referred to as a certificate of organization or a certificate of formation the llc operating agreement is another document that is not required but highly recommended each owner should contribute to and sign the operating agreement which details the company's management structure investor contributions profit division and contingencies such as what happens to the llc if a member leaves or dies if you intend to expand into other states the llc must appoint a registered agent a registered agent serves as the company's point of contact for official paperwork in addition to the articles of organization some states may require new llcs to file a statement of information the statement of information requests the company name information about partners and the business address filing fees for llcs vary by state and if you have locations in other states you'll need to register the llc in those states as well as well as pay fees in each although each state is different most require llcs to file annual notices and pay a fee with the secretary of state's office to verify the llc's continued existence and to update information about the company and its members in addition many states require llcs to pay an annual
Thanks for your comment Darrick Kohler, have a nice day.
- Hayden Angotti, Staff Member
we're talking to stephen in albuquerque new mexico coming out of school got his buddy they want to both be consultants they're talking about doing it together and he heard a rumor that that might be troubling like a bad marriage uh so what kind of consulting are you going to do stephen we're thinking of partnering with local high schools and helping students apply for scholarships okay either one of you ever done that well we both uh uh have a lot of experience applying for scholarships and successfully getting them um so we think we're a good fit for uh for helping people that are kind of new to that sort of thing okay all right um all right uh what's the business model how's that gonna have you guys figured out how you're gonna charge is it parents is it school systems paying you what's the model so the basic model is gonna be two tiers we're going to have um one opening tier where we provide um introductory videos where um parents or schools can pay to access the videos where we provide basic stuff and then if folks want to move up and meet with us one-on-one you know we'll offer that too if you know if they're in our region okay all right well let me start with the premise that i operate on and that is the only ship that won't sail as a partnership so i would urge you to try to figure out a way to do this as a joint venture rather than a partnership because what typically happens in all the years i've done business coaching i find almost zero i mean it's not quite but it's almost zero businesses one decade later are still partners the exception is by far the the notable exception is medical partnerships and law firms but short of that the the typical two guys that go start into doing something and what normally happens is one of you works harder than the other one of you has better ideas than the other one of you makes more sales than the other one of you is more personable or more talented than the other and it can be you it could be switching places like one of you is more talented and the other one works harder and so they you end up there there's this resentment thing that builds up and you don't feel like the other guy's carrying his weight and uh it runs into all kinds of crap if you are going to and so i would try to figure out a way to say okay uh i'm going to go over here and do this set of schools you go over here and do that set of schools we'll compare notes we'll help each other uh we'll encourage each other but that set of schools is your money this set of schools is my money and even if we create a video product together that we share the cost on when i sell the videos in my schools i make money when you sell the videos in your school you make money and just kind of keep it very separate like a joint venture rather than a full-on partnership i'm going to challenge you to do that that's what i want you to do because i think you're going to make a mess if you don't but if you ignore that here's still some guidelines all right you need to get an attorney believe it or not i i don't want to tell you to do that but you need to draw up a detailed partnership agreement and it has to address all of the evil deeds everything that's bad is going to happen just about begins with a d drug use disinterest default one of you walks away and wants to own half of it while the other one keeps working that's default right um disability death what happens then you now own half of a scholarship business with his mom and dad because that's his heirs because he's not married what a dadgum mess you know and so you got to address every one of the possible negative d's disability death divorce drug use uh uh default disinterest i just don't want to do this anymore i'm gonna walk away and go i'm gonna go get a job we're not making enough money but i'm still gonna be pissed at you when you're successful later yeah um and so all of that kind of crap and so you gotta deal with every possible exit scenario and most of them begin with a d and you need to do that in writing in a partnership agreement before you begin and i probably would not put it in the form of a general partnership which leaves you up in all kinds of financial liability i'd put it in the form of an llc but it still functions as a partnership and i'm still going to tell you to figure out a different way to do it yeah and i i would i would add too i think that's absolutely brilliant advice i would not even think about starting a business i liked your idea i'm going to edit it a little bit on the idea of you take one school system in this county you take the other let's see if we can prove this thing before we actually either one of us thinks about a business let's prove this model first i like that approach and then the other thing is i was i'm curious to know if you've got a situation where maybe steven's more the sales guy more of the you know okay this is the handbook on how to get scholarships and maybe the other guy's more video related and we don't know that but in that situation instead of a true partnership maybe one of you is like okay you're the video product producer i pay you and they work together but it's not even a joint venture that's a way to do it as well and the other option is um just one of you own it that's right and they pay the other one hey and the other one can make a percentage of profits as their income that's right but they're not the owner that's right when i sell is anything with two heads is a monster i agree so if one was the video specialist the idea here is is that he gets paid a percentage on every course you sell but it's your company and he's your production it's like a contractor yeah there's something that we seek out stephen that i want you to avoid because it's a it's a it's a it's a it's mythology it's a lie and the that um there's comfort in doing things with other people and not feeling like the lone ranger there's comfort in you and your buddy doing locking arms and working on stuff together there's comfort when ken and i work together on launching ken's book yeah and then when we add to that an entire team around us there's a lot more comfort to that because it's not you know it's not good that man be alone and um so you feel more invincible more strong more courageous when you have your you know your guy next to you and and you confuse that comfort with the need to do a partnership it can be an employee employer relationship yes absolutely and you can pay him zero salary only a percentage of profits and the part that he brings to the table is x y and z and you bring a b and c and one of you probably had more of this idea of turning this into a business than the other one did that's right and just because you both want to win that's what dave's saying is so beautiful just because you both want to win does it mean we have to both be in it together in the same exact role i think you're right dave that comfort can turn into contention pretty quickly if they don't focus on those ds almost always almost always yeah
Thanks Fermin your participation is very much appreciated
- Hayden Angotti
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I've studied transportation engineering at San Francisco State University in San Francisco and I am an expert in molecular physics. I usually feel giggly. My previous job was irrigation engineer I held this position for 17 years, I love talking about safari and paragliding. Huge fan of Jimi Hendrix I practice floor exercises and collect artist trading cards.
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