Filing Business Names FAQ

info courtesy of:
UGA Small Business Development Center (SBDC)

What is the Legal Designation of Your Business?

When setting up a business, carefully think through the type of legal designation you choose. Sole proprietorships, partnerships (general and limited), corporations and limited liability companies have different legal protection and different federal and state tax implications. It is recommended that you consult with an attorney, certified accountant or other qualified individuals to determine which legal entity you associate with your business.

Sole Proprietorship

A sole proprietorship is usually owned and operated by one person. It is not considered a legal entity. Rather, it is an extension of the person who owns the business. The individual has sole ownership of assets and is also solely liable for the debts of the business.

General Partnership

A general partnership is comprised of two or more individuals who join to start a business. Each person has proportional ownership of the business assets, proportional liability for business debts and authority in running the business. A partnership agreement can be created which details each partner’s rights and responsibilities.

Limited Partnership

A limited partnership is made up of one or more general partners and one or more limited partners. Limited partners contribute capital and share in profits/losses. These limited partners take no part in the running of the business and are not held liable for the organization’s debts.

Corporation

A corporation is an entity which must be approved by the state of Georgia through the Office of the Secretary of State. A corporation must file federal, state and local taxes on its operation. Corporations offer protection from liability afforded to shareholders.

Limited Liability Corporation (LLC)

A limited liability company (LLC) is owned by two or more persons known as members. It is a mixture of other forms of organizations which combines the best features of partnerships and corporations. An LLC’s name must be reserved and the articles of incorporation must be filed. An operating agreement should be written to control the conduct of the business.