Choose wisely when selecting business structure

Business associations.
The various forms of business associations have experienced many changes over the past few years. I get repeated calls asking whether a business should be operated under a corporation, partnership, limited liability company, etc.
To help answer that question, you have to delve into the nature of the business and the objectives of the organizers. The purpose of this article is to let you know that there are a lot of options, and one or more may fit your needs.
A few years ago, the more popular forms of business associations were corporations, general partnerships, limited partnerships, and joint ventures. Investors frequently referred to joint ventures, but in fact, true joint ventures were rightfully rarely used. Corporations were most frequently selected when formally organizing entities. Corporations, when properly formed and operated ? to look like a duck, walk like a duck, and quack like a duck ? generally afforded its shareholders the protection of limited liability.
Individual asset protection has always been one incentive of incorporation. Within certain guidelines, the income and/or losses of the corporation could, and still can, be taxed either to the corporation or passed through to the shareholders. Colorado has offered, and continues to offer, corporations that serve various uses ? those for profit, nonprofit and special purpose, such as ditch and reservoir companies, water users? associations, et al.
Corporations have the advantage of being well-understood in the business community and remain a popular business vehicle. Where large numbers of owners are involved, corporations are particularly attractive because the governance is better understood and large numbers of owners are more easily organized.
Partnerships have been around as long as the common law and have been a popular business vehicle. Partnerships do not require the formality of a corporation and may even be verbally constituted. People tend to refer to ?their partner? in a formal reference and in a generic sense. We have shareholders in a small company that refer to each other as ?partners,? and members in a limited liability company that refer to other members as their ?partners.? In fact, from a legal business organization standpoint, they are not partners at all.
You need to tread lightly in this area or you might get what you wish for. The unpopular aspect of a general partnership, and probably the most prevalent reason for it falling into very limited use in recent years, is that the partners are individually and jointly liable for the acts of the other partners while conducting partnership business ? not always a pleasant experience.
Since Wyoming first introduced the limited liability company (LLC) and the Internal Revenue Service recognized it for tax purposes like a partnership, the quick shift in the 50 states has been to the adoption of LLC legislation and its use by the business community. The LLC?s beauty is its treatment for tax purposes like a partnership without the owners? individual liability. In recent years, the statutes have been further amended to provide that sole proprietorships can be organized as a single-member LLC. In the case of a single-member LLC, you are not required to file a partnership tax return.
The limited partnership has equally made changes limiting general partner liability. A limited partnership has a general partner or partners and a limited partner or limited partners. The general partners have general liability for the acts of the partnership in the same manner as a partner in a general partnership. In organizing limited partnerships, corporations were frequently used ? faced with standards to maintain partnership status ? to limit the scope of the general partners? liability.
We can now maintain control in the general partner and convert the old partnership or organize the new partnership as a limited liability partnership (LLP) or a limited liability limited partnership (LLLP), all with the desired effect of retaining control in the general partner while at the same time limiting his or her liability.
The scope and availability of potential business organizations has greatly expanded over the past few years. Consult your CPA and/or lawyer. I feel sure that there is a form of business organization that exactly fits your needs. The information in this article is a small tip of the iceberg.

Bill Wyatt is a partner in the law practice of Wyatt & Wyatt LLC in Fort Collins. Wyatt?s firm specializes in commercial law and property law. He can be reached at (970) 484-1112 or wyattlaw@qwest.net.