Louisiana Business Formation Law Firm

When staring a company In Louisiana, there are a number of questions you must ask and a number of steps that must be taken to get started.  What type of entity do you want to create?  Do you need articles of organization or articles of incorporation?  Do you require an operating agreement?  Are you aware of the advantages, risks, and obligations associated with the different types of entities?  Do you require assistance with banking, financing, real estate, employment matters, taxes, or commercial leases?

If you are forming a business in Louisiana, be sure to retain the services of an experienced business law attorney.

Common Types of Business Entities

There are many options when it comes to the type of entity to form.  Each type has its own benefits, drawbacks, and requirements.  Some of the most common options include limited liability companies (LLCs), limited liability partnerships (LLPs, C corporations, and S corporations.  Other options include sole proprietorships, partnerships, limited partnerships, professional corporations, and non-profit corporations.  Each of these entities have unique advantages and disadvantages.

Limited Liability Company

A limited liability company (LLC) is a type of business entity that combines elements of a corporation, partnership, and sole proprietorship.  In an LLC, the owners’ personal liability is limited, meaning personal assets are shielded from the obligations of the company.  LLCs usually have the same tax status as a partnership or sole proprietorship, though.

Corporations file and pay taxes at the corporate level, making them distinct tax entities. LLCs are pass-through entities.  Profits and losses are transferred to owners who pay taxes at the personal level.

The owners of an LLC are known as members.  A piece of the company is owned by each member, usually in proportion to their investment.  In terms of management, an LLC’s members have the option of acting as passive investors by designating one or two managers to oversee the company (either members or non-members) or sharing management duties.

An operating agreement is used by LLCs to outline their governance, including management structure, share purchase and sale limits, profit sharing, and dissolution procedures. Operating agreements are adaptable and can be created in accordance with the preferences of the members.  In contrast, corporations must explicitly adopt bylaws in accordance with the applicable state law.  LLCs are exempt from the stricter laws and regulations that corporations must abide by.

Limited Liability Partnership

Forming a partnership is a reasonably simple and low-cost option to launch a business.  Despite these benefits, partnerships raise liability concerns, which is why many start-ups think about forming as corporations or limited liability companies.  A limited liability partnership (LLP) combines the benefits of these different entities, but not every business is a good fit for an LLP.  LLPs are common among professional services.

An LLP is a company with two or more partners that combines the management and liability characteristics of a corporation and a general partnership.  Their personal liability is protected from debts or obligations resulting from another partner’s malpractice.  Generally speaking, a partner’s personal responsibility is capped at the amount they invested in the partnership.  An LLP shields a partner from malpractice claims against another partner, but it does not shield a partner from lawsuits resulting from their own carelessness.

An LLP, which has a more formal structure than a general partnership, typically needs a written partnership agreement that outlines the firm’s operational framework and profit-sharing schedule.

For tax reasons, an LLP is usually a flow-through entity, which means that its partners receive a portion of the profits (and losses) and are thereafter subject to personal taxation.  In order to prevent double taxation, an LLP does not pay federal taxes much like an LLC.

C Corporation

A C corporation, or C corp, is a distinct legal entity from its owners.  A C corp’s owners are its shareholders, who own a portion of the company in an amount usually equal to their investment.  A board of directors is elected by shareholders to supervise operations and select officials to run the company’s daily operations.

A C corp’s ability to shield shareholders’ private assets from the company’s creditors is among its most attractive benefits.  The owners are not personally liable in the case of bankruptcy or a lawsuit against the company.

C corporations pay federal corporate income tax on their profits and are subject to entity-level taxation.  Profits are distributed to shareholders, typically in the form of dividends.  Shareholders pay personal taxes on these profits, meaning there is double taxation.

S Corporation

An S corporation, or S corp, is a unique tax status available to corporations.  Generally speaking, S corporations are smaller companies.  A lot of S corps have just one owner.

The Internal Revenue Service (IRS) accepts applications for S corp status from both C corporations and LLCs.  S corp status gives C corporations and LLCs the advantage of a tax structure intended for partnerships while preserving the limited liability afforded to the original C corp or LLC.

For tax purposes, a S corp is a pass-through entity, much like a partnership.  The owners receive its profits, losses, credits, and deductions and report them on their personal tax forms.  They are thereafter subject to individual taxation.  Federal corporate taxes are not paid by the S corporation itself.

Not all corporations or LLCs are eligible for the S corp status, despite the fact that it is appealing since it prevents double taxes.  These businesses need to fulfill certain requirements in order to qualify.

Common Business Formation Documents and Annual Filings

There are many types of official documents that need to be created or considered when forming a business.  For instance, Articles of Organization are required to form an LLC and an Operating Agreement is highly advised if there are multiple members of the LLC.  The Articles set the basic structure of the company and is publicly filed with the Secretary of State, while the Operating Agreement is a private document that goes into greater detail regarding the relationship between the various members.

A Partnership Agreement is required to form the different types of partnerships.  Articles of Incorporation are necessary to form a corporation and must be filed with the Secretary of State.  Bylaws are highly recommended for corporations.  Corporations have a requirement to maintain Minutes of any official meetings.

There are requirements to file Annual Reports with the Secretary of State.  These will include basic information regarding the members, partners, or shareholders, as well as the company’s Registered Agent designation.  A registered agent is the person who is designated to receive process of service in the event that the company is involved in legal proceedings.  Common registered agents include one of the owners or officers, a business law attorney, or a third-party service company.  Appointing an attorney or service company will entail paying an annual fee.

Other common business documents include lease agreements, employee handbooks, buy-sell agreements, non-compete agreements, and non-disclosure agreements.

Business Dissolution

Just as there are specific requirements for forming a business in Louisiana, there are also required steps for dissolving a business.  It is advisable for a company to devise its own detailed procedures within its operating agreement, partnership agreement, or bylaws.  There are many options for handling this such as requiring a unanimous vote or having an automatic trigger such as the death or bankruptcy of an owner.  It just depends on what the owners want, and legal advice is highly encouraged.

New Orleans Business Formation Attorneys

Bowes, Petkovich & Palmer, LLC is a Gretna law firm that has served the New Orleans area since 1980.  Our experienced business formation lawyers can analyze your needs and advise you regarding your options and prepare the necessary documents to form your business.  We take pride in offering a personal and trusted experience.  Call us today for a free consultation and find out why so many of our clients come back to us.