Starting your own business can be a rewarding, yet daunting, task. It will take passion and perseverance in order to ensure your business will thrive. Before a business is permitted to operate, it must be recognized under the law which occurs only after proper formation. Steps to form a business vary depending on the type of entity.

Sole Proprietorship

A Sole Proprietorship is a type of business is which a single individual owns every asset and assumes all debts of the business. The business does not have a separate existence from its owner. There are no formal requirements needed to form a sole proprietorship as the status comes from the start of business activities. However

Partnerships

A General Partnership is created when two or more persons or entities, as co-owners, carry on a business for profit. No written agreement, formal requirement, nor intent is required to form a general partnership. Thus, persons or entities can inadvertently create this type of partnership despite an express subjective intent not to do so. For example, if the required formalities to form a limited partnership are not followed, a general partnership will result.

A Limited Partnership (LP) is a partnership that is composed of both general and limited partners but must have at least one general partner. A general partner is a person or entity that has unlimited liability and full management control of a business. A limited partner has almost no involvement in management, and their liability is limited to the amount they invested into the partnership.

An LP is formed once a Certificate of Limited Partnership is formed with the Secretary of State. The Certificate of Limited Partnership must include:

  1. The name of the partnership: If the business is an LP, the name must include the words “limited partnership” or the abbreviation “LP.” If the business is a limited liability limited partnership, the name must include the words “limited liability limited partnership” or the abbreviation “LLLP.”
  2. The address of the partnership’s principal office: A principal office is usually considered to be the headquarters or where the executives are located.
  3. The name and address of the partnership’s in-state, registered agent
  4. The name and address of each general partner
  5. Whether the partnership is a limited liability limited partnership (LLLP)
  6. Signatures of all general partners

If any of these requirements fail to be met, the formation of a general partnership will result.

A Limited Liability Partnership (LLP) is a partnership in which every partner enjoys limited personal liability. Any partnership has the ability to become an LLP if:

  1. There is approval by the same vote that is necessary to amend the partnership agreement: Unless otherwise agreed upon, a unanimous vote is required.
  2. A Statement of Qualification is filed with the Secretary of State: A Statement of Qualification does not create a new partnership, nor does it relieve a previous partnership of any unfulfilled obligations. It must include:
    1. The name and address of the partnership – The name must end with “Registered Limited Liability Partnership”, “Limited Liability Partnership”, “R.L.L.P.”, “L.L.P.”, “RLLP”, or “LLP”
    2. A statement expressing the intent to become a limited liability partnership
    3. A deferred effective date, if applicable

Corporation

 A Corporation is an entity that will act as a single, fictitious person. Under the Revised Model Business Corporation Act, a collection of laws designed to regulate interstate corporate affairs, a corporation is deemed to exist on the date in which the Articles of Incorporation are filed with the Secretary of State. The Articles of Incorporation must contain:

  1. The corporate name
  2. The number of shares the corporation is authorized to issue
  3. The address of the corporation’s initial registered office and the name of the initial registered agent at said office
  4. The name and address of each incorporator

Limited Liability Corporation

A Limited Liability Corporation (LLC) is a type of corporation that protects the owners from debts and liabilities of the business. An LLC is formed when:

  1. The Articles of Organization is properly filed with the Secretary of State which must include:
    1. The name of the LLC
    2. The name of the founding members
    3. The LLC’s address
    4. The purpose of the LLC
    5. The name and address of the registered agent
    6. The names of any managers and directors
    7. The LLC’s effective start date
    8. The duration of the LLC
  2. The company has at least one member

If you are in the process of establishing a business and need guidance on the business structure or completing the process to register your business, the Lake County law firm of Johnston Tomei Lenczycki & Goldberg LLC can assist with all of your business formation needs. Call our office at 847-549-0600.

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