What are the laws for private owned companies in Georgia?

Full Question:

What are the laws for private owned companies in this state?
01/31/2007   |   Category: Corporations ยป Professional...   |   State: Georgia   |   #1287

Answer:

A sole proprietorship is a form of business ownership in which one individual
owns a business. The owner may either be the only worker of the business
or he may employ as many people as he needs to run the operation. He
can use his own name or a trade name. If a trade name is used, oftentimes
the business will be identified on official forms and in the case of a lawsuit by
use of the designation "d/b/a" (doing business as). For example, "John
Jones, d/b/a Multimedia Designs."

Advantages:

One advantage to a sole proprietorship is that the owner is not required to
pay organizational fees, such as in a corporation. Also, he controls all of the
decisions and receives all of the profits. The business's net earnings are not
subject to corporate income tax, but are taxed as personal income.

Disadvantages:

One disadvantage of a sole proprietorship is that the owner is subject to
unlimited personal liability for the debts of the business. This is not true in a
corporate organization. Also, the investment capital is limited to the
resources of the sole proprietor, and this may hurt the growth of the
business. Corporations can issue stock and raise capital that way.
Another disadvantage is that upon the death of the owner, his authority to
make contracts terminates, and this, of course, will effectively kill the
business.

A partnership involves combining the capital resources and the business or
professional abilities of two or more people in a business. Law firms,
medical associations, and architectural and engineering firms often operate
under the partnership form.

Advantages:

One advantage is that a partnership allows more than one individual to pool
financial resources without the requirement of a formal corporate structure
and without the expense of organizational fees.

Disadvantages:

One disadvantage is that each partner has unlimited personal liability for the
debts of the partnership. Also, the partnership is technically dissolved by the
death of a partner, although there is some statutory relief with regard to
winding up the affairs of the partnership after the death of one of the
partners. A new partnership can then be formed.

A limited partnership is a modified partnership. It is half corporation and half
partnership. This kind of partnership is a creature of State statutes. In a
limited partnership, certain members contribute capital, but do not have
liability for the debts of the partnership beyond the amount of their
investment. These members are known as limited partners. The partners
who manage the business and who are personally liable for the debts of the
business are the general partners. A limited partnership can have one or
more general partners and one or more limited partners.

A limited partnership has to be created by executing a certificate which sets
forth certain information and is filed with the Secretary of State’s office.

The general partners manage the business of the partnership and are
personally liable for its debts. Limited partners have the right to share in the
profits of the business and, if the partnership is dissolved, will be entitled to
a percentage of the assets of the partnership. A limited partner may lose his
limited liability status if he participates in the control of the business.

A limited liability company (LLC) is a separate legal entity that can conduct
business just like a corporation with many of the advantages of a
partnership. It is taxed as a partnership. Its owners are called members and
receive income from the LLC just as a partner would. There is no tax on the
LLC entity itself. The members are not personally liable for the debts and
obligations of the entity like partners would be. Basically, an LLC combines
the tax advantages of a partnership with the limited liability feature of a
corporation.

An LLC is formed by filing articles of organization with the secretary of state
in the same type manner that articles of incorporation are filed. The articles
must contain the name, purpose, duration, registered agent, and principle
office of the LLC. The name of the LLC must contain the words limited
liability company or LLC. An LLC is a separate legal entity like a corporation.

Management of an LLC is vested in its members. An operating agreement is
executed by the members and operates much the same way a partnership
agreement operates. Profits and losses are shared according to the terms
of the operating agreement.

A Limited Liability Partnership (LLP) is essentially a general partnership with
the limited liability of an LLC. It is owned by partners rather than members.
It is may be easier in some respects to convert a general partnership into an
LLP as opposed to an LLC. The partnership agreement would only have to
be amended for an LLP, but redrafted as an operating agreement for an LLC.

Business corporations are created when the Secretary of State approves
articles of incorporation prepared by incorporators. Corporations formed
for profit have to have shareholders, directors and officers. The
shareholders are responsible for electing the board of directors. The board
of directors are ultimately responsible for the management of the business,
but they employ or elect officers who run the day-to-day operations.
Corporations may range in size from an incorporated one-person business
to a large multinational business.

Advantages:

One advantage is that the shareholder's risk of loss from the business is
limited to the amount of capital that the shareholder invested in the
business. Also, a corporation can raise capital by issuing stock which can
allow the corporation to expand.

A corporation is a separate legal entity (a legal person) and can own
property, make contracts, bring lawsuits, and be sued as a person.

Disadvantages:

A corporation is required to pay corporate income taxes. Shareholders
who receive dividends from the corporation are required to pay personal
taxes on these dividends. This results in double taxation which may certainly
be a disadvantage against incorporation of small businesses with just a few
shareholders (e.g., close corporations). One way around double taxation in
a close corporation situation where the shareholders also work for the
corporation, is to make sure that they receive salaries and bonuses
sufficient to wipe out any profits that would have to be distributed as
dividends. However, any salary and bonus paid cannot be more than what
would be reasonable considering the type of business the corporation is
involved in. If the salary is unreasonable, the IRS may declare that part of
the salary is really a dividend, and tax the corporation on this portion as well
as the individual.

The organization and operation of a corporation does involve some
expenses which would not be required in a sole proprietorship. For example,
certain filing fees have to be paid upon filing the articles of incorporation.
Also, State corporation laws may also require the filing of an annual report,
as well as other reports