Key Terms
Easy to form
No documents, no government filings, no formation costs. Owner simply starts doing business.
Autonomy
Owner controls all decisions - hours, growth pace, new lines of business.
Total financial control
All money belongs to the owner, even if kept in a separate business account.
Flow-through taxation
The business does NOT pay its own taxes and does NOT file a separate tax return. Profits flow through to the owner, who
One owner only
Cannot bring in co-owners. The owner and the business are legally identical.
Cannot be passed on
Because owner and business are the same legal entity, the business cannot be transferred or inherited as a business.
Hard to raise capital
Banks treat business loans like personal loans (car loans, mortgages). High down payments, personal collateral required.
Unlimited liability
Owner is personally liable for ALL business debts and obligations. Personal home, car, bank accounts, and retirement acc
Formation
File articles of organization with the state (typically Secretary of State). Requires only the LLC's name and contact in
Articles of partnership
The written agreement if the partnership is formed formally. Can include any terms the partners agree to.
Taxation
PCs are a separate taxable entity. They are NOT flow-through entities.
Liability
Members are NOT personally liable for business debts. Risk is limited to their financial investment.
Dissolution
General partnerships dissolve as easily as they form. When the agreement to share profits and losses ends, the partnersh
Buy/sell agreement
Should be included in the articles of partnership to define how a withdrawing partner's share is valued and paid out.
Limited partner
Can lose only the amount of their investment. No more.