Venable presented at the Washington, DC Economic Partnership's Doing Business 2.0 event (11/14/12).

1. Choice of Entity and Formation:
“TLC” for your Business
Washington, DC Economic Partnership
Joseph B. Walker, Esq.
Venable LLP
November 14, 2012
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2. T
axes
L iability Protection
C orporate Formalities
© 2012 Venable LLP
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3. Sole Proprietorship
Taxes: Pass-through taxation; ordinary income to
owner.
Liability Protection: None
Corporate Formalities: None
© 2012 Venable LLP
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4. Sole Proprietorship – Sources of Funding
Contributions from the owner.
Bank lending – based upon the credit worthiness
of the owner, and owner is personally liable to the
lender.
Third-party equity investment: Not available.
© 2012 Venable LLP
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5. General Partnership
Taxes: Pass-through taxation; ordinary income to
owners.
Liability Protection: None
Corporate Formalities: None
© 2012 Venable LLP
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6. General Partnership – Sources of Funding.
Contributions from the partners.
Bank lending – based upon the credit worthiness
of the partners, and partners are jointly and
severally personally liable to the lender.
Third-party equity investment: Partnership
interests may be sold to third-parties who are
willing to assume liability risks.
© 2012 Venable LLP
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7. Limited Partnership
Taxes: Pass-through taxation; ordinary income
for both general and limited partners.
Liability Protection: No protection for general
partners; limited liability for limited partners.
Corporate Formalities: Maintain distinction
between general and limited partners.
© 2012 Venable LLP
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8. Limited Partnership – Sources of Funding
Contributions from both general and limited
partners.
Bank lending – varies.
Third-party equity investment: General
partnership interests may be sold to third-parties
who are willing to assume liability risks; non-
participating limited partnership interests may be
sold to third-parties who will not be participating in
management.
© 2012 Venable LLP
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9. Limited Liability Partnership
Taxes: Pass-through taxation; ordinary income to
partners.
Liability Protection: Limited liability for malpractice of
other partners; no protection for general liabilities of
the partnership.
Corporate Formalities: None
*Generally used in professions such as law firms, accounting firms, etc.
© 2012 Venable LLP
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10. Limited Liability Partnership – Sources of Funding
Contributions from partners.
Bank lending – varies.
Third-party equity investment: Partnership
interests may be sold to individuals who are
licensed to practice in the field in which the LLP
does business.
© 2012 Venable LLP
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11. “C” Corporations
Taxes: Double taxation
Liability Protection: Shareholder liability limited to
investment in the corporation.
Corporate formalities: Officers, annual meetings,
records, etc.
© 2012 Venable LLP
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12. “C” Corporations – Sources of Funding
Bank lending – based upon creditworthiness of
the Corporation.
Third-party equity investment: Shares in the
corporation may be sold to third-parties.
© 2012 Venable LLP
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13. “S” Corporation
Taxes: Pass-through taxation; ordinary income to
shareholders. (Can “check the box” to be taxed as a
“C” Corporation.
Liability Protection: Shareholder liability limited to
investment in the corporation.
Corporate Formalities: Officers, annual meetings,
records, etc. (Same as “C” Corporation)
Several statutory requirements to be a stockholder.
© 2012 Venable LLP
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14. “S” Corporation – Sources of Funding
Bank lending – based upon creditworthiness of
the Corporation.
Third-party equity investment: Shares in the
corporation may be sold to certain qualified third-
parties. (Limits equity investments)
© 2012 Venable LLP
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15. Limited Liability Company
Taxes: Pass-through taxation; ordinary income to
members.
Liability Protection: Member liability limited to
investment in the company.
Corporate Formalities: Flexible
No statutory requirements to be a member.
*Entity of choice for most new businesses.
© 2012 Venable LLP
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16. Limited Liability Company – Sources of Funding
Bank lending – based upon creditworthiness of
the Company.
Third-party equity investment: Membership
interests in the Company may be sold to third-
parties.
© 2012 Venable LLP
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