One person owns and runs the entire business as a sole proprietor in this type of business organization. It is the simplest and most typical type of corporate organization in the US. In a sole proprietorship, the owner is fully in charge of the company and liable for all of its liabilities. The qualities of a sole proprietorship will be covered in this article, along with some related topics like the series LLC, separate series agreement, series limited partnership, and an LLC’s eternal existence.
A sole proprietorship lacks a separate legal entity from its owner and is an unincorporated business. This indicates that for tax and legal purposes, the owner and the company are regarded as a single entity. As a result, the owner is held personally liable for all of the company’s obligations. The owner is additionally taxed on all business income, which is disclosed on their personal tax return.
A sort of limited liability corporation (LLC) called a series LLC enables a single company to establish many “series” with the same organization. Each series is viewed as a distinct entity with its own members, assets, and responsibilities. The entire series LLC is still regarded as a single legal company, nonetheless. Whether a series LLC qualifies as a S Corp relies on the laws and standards of each state as well as those set forth by the IRS.
Each series within a series LLC is subject to the terms and circumstances of a distinct series agreement, which is a legal document. Each series’ members, assets, liabilities, rights, and obligations are all described in detail. This agreement is crucial because it aids in the division of each series’ assets and obligations, which might shield the owner from personal accountability.
A type of partnership called a “series limited partnership” enables the creation of various “series” inside of a single partnership. Each series is viewed as a distinct legal person with its own resources, obligations, and partners. The partners may gain tax-wise and from the structure’s ability to shield them from personal accountability.
Last but not least, an LLC can have eternal existence, which means it can carry on endlessly regardless of changes in management or ownership. This is one benefit of an LLC over other corporate entities like a sole proprietorship or partnership, which could end with the passing away or retirement of the owner or partner, respectively.
In summary, a sole proprietorship is a type of business entity with just one owner. It is the simplest and most typical type of corporate organization in the US. The series LLC, separate series agreement, series limited partnership, and perpetual existence of an LLC are all related to this subject and each has particular advantages and features of its own. It is crucial for business owners to comprehend these various structures and select the one that best satisfies their requirements and objectives.
Creating numerous “series” of assets within a single limited liability corporation is possible in Tennessee with a series LLC. The LLC’s liability shield protects each series while allowing each to have its own unique business purpose, assets, liabilities, and members. Businesses that desire to keep their many business lines or properties independent from one another for liability and tax reasons can benefit from this type of arrangement. One of the first states to allow the formation of Series LLCs was Tennessee.