Business & Commercial Law
Business or Commercial law covers many areas of law, and overlaps with specific fields, like bankruptcy, workers’ compensation and social security disability. Kennedy, Kennedy, Robbins & Yarbro, LC, is well-versed in helping our business clients make smart, informed decisions when it comes to the legal aspects of running their businesses.
One of the most important decisions we can help our clients make is the proper business entity to choose when starting a business. A business may be formed as: (1) a sole proprietorship; (2) a partnership(including limited partnerships and limited liability partnerships), (3) a corporation (including a sub-chapter S corporation and a closely held corporation); and (4) a limited liability company.
A sole proprietorship is typically an individual, or a husband and wife, who have made a decision to run a business. The business is not registered with the state, so there are few legal documents needed to form the business. This form of business organization, while simple and inexpensive to start, does not provide any protection for the owners’ personal assets should the business be sued. For tax purposes, the business is generally bypassed and the profits or losses are reported directly on the owners’ personal tax returns at both the federal and state level.
A partnership is defined as two or more individuals who join together to operate a business together for a profit. Each individual is involved in the day-to-day operations of the business and shares in the profits and losses. Like a sole proprietorship, a partnership is relatively easy to form and does not require a formal document to be filed with the state. A prudent step for partners, however, is to have a written partnership agreement which specifies the terms of their agreement, including assigning of a portion of the profits, losses and expenditures.
A limited partnership is another form of partnership. This form of a partnership requires a filing with the Secretary of State’s office. In a limited partnership, the limited partners share in the profits, but they cannot participate in the management of the limited partnership. The business is operated by the general partner.
Under Missouri law, a partnership may also be set up as a limited liability partnership. This form of a partnership requires a filing with the Missouri Secretary of State’s office and annual filings thereafter. While it requires more extensive documents to form and maintain, it also provides for the protection of the individual partners’ personal assets.
Regardless of the type of partnership, for tax purposes, the business is generally bypassed and the profits or losses are reported directly on the owners’ personal tax returns at both the federal and state level.
A corporation is a legal entity that is separate and distinct from the owners. The persons forming a corporation file a document called “Articles of Incorporation” with the Secretary of State’s office. Once accepted, state law treats the corporation as a “legal person”, meaning that the corporation can enter into contracts, and can be sued, as if it were an individual. Because of its separate status, a corporation provides personal asset protection for its shareholders. For tax purposes, unless a sub-chapter S election is filed, the profits and losses of the corporation are shown on a corporate tax return. State law requires the corporation to have bylaws and to hold an annual meeting. There are also annual filings with the state to maintain corporate status.
Missouri law also recognizes the formation of a non-profit corporation, which has a separate set of rules and requirements for formation and day-to-day operation. The Internal Revenue Service provides for a different income tax treatment for non-profit corporations if a 501(c)(3) application is filed or if the entity is covered by other federal statutes.
A limited liability company is a combination of the partnership and corporation entities. A limited liability company is formed by filing “Articles of Organization” with the Secretary of State’s office. There are no annual filings required thereafter. The owners are called “members” and are responsible for the day-to-day operations, like a partnership, unless the formation documents identify a “manager” to handle the decisions of the business. Like a corporation, a limited liability company provides for protection of the members’ personal assets. If a limited liability company complies with current federal and state income tax rules, the income earned by the limited liability company is taxed in the same manner as the income from a partnership.
Other areas in which the business lawyers of Kennedy, Kennedy, Robbins & Yarbro, LC, can be of assistance include unemployment compensation claims, Americans with Disability Act (ADA) claims, the acquisition and/or sale of a business, covenants not to compete and other complex business litigation.
If you need legal assistance, or for further information about a business or commercial law need, please contact us or call Kennedy, Kennedy, Robbins & Yarbro, LC, at (573) 686-2459. Our commitment is to earn your confidence by answering all questions and providing quality representation.