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Attorney Ben Proto - The Musings of a Mad Lawyer

Friday, September 29, 2017

An Overview of Business Entity Formation in Connecticut

Determining how to legally structure your business is an important decision. All businesses are different, and one entity type may be more appropriate than another depending on the factors involved. Issues such as an organization’s financial health and the nature of activities the business engages in are helpful in determining the appropriate entity type. Below is an overview of some of the most common types of business entities.

  1. Sole proprietorship – A sole proprietorship is a type of unincorporated business, and no special registration or paperwork is required to form such an entity. In fact, all one must do to form a sole proprietorship is report all business income and expenses on a 1040 Schedule C tax form. This type of business is considered the easiest to set up and dissolve.

  2. Stock corporation - A stock corporation is a for-profit business with shareholders who receive a portion of its ownership via shares of stock. Shareholders often receive a return on their investment in the form of dividends. 

  3. C corporation – A C corporation is a type of incorporated business that affords its shareholders limited liability protection. C corporations must have at least one shareholder, and such entities have full discretion over the amount of profits they can retain and distribute. 

  4. S corporation – An S corporation is a type of entity that affords its shareholders limited liability protection. Like C corporations, S corporations must have at least 1 shareholder. However, S corporations are not permitted to have more than 100 shareholders. In addition, S corporations have full discretion over the amount of profits they can retain and distribute.

  5. Partnership – A partnership is an unincorporated businesses that is considered a separate entity from its shareholders. Partnerships are required to have at least 1 general partner who assumes complete liability for the business. Partnerships must have a minimum of 2 partners. The net income of the partnership is considered the income of the partners, even if the partnership retains all or some of the same.

  6. Limited liability partnership - Limited liability partnerships are essentially general partnerships, but with the addition of giving the partners at least some limited personal liability 

  7. Limited liability company – Limited liability companies combine the characteristics of a corporation and a sole proprietorship or partnership. The members of a limited liability company cannot be held personally liable for the company's liabilities or debts.

Connecticut Business Law Attorney

Given the complicated nature of business entity formation, it is highly recommended that you consult with experienced Connecticut legal counsel before embarking upon the process. At the law office of Benjamin S. Proto, Jr., we provide advice and guidance regarding the formation of all types of business entities while ensuring that our clients understand all of their legal rights and options. Please contact us for a consultation.




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| Phone: 203.378.9595

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