Tag: General Partnership

Choice of Business Entity (Part 1)

Congratulations, you have decided to start a new business.  You are going to become an “entrepreneur”, a business owner.  You have put together your business plan, located potential business premises, talked with your advisors, and are ready to get started.

You have talked with an attorney and an accountant and they have advised you to form a “business entity”.  Now you have to decide which one is right for you.  So, what are your choices?  Following are just a few options:

Sole Proprietorship.  You could own and operate the business and not form a separate entity.  This is generally the “simplest” legal way of owning and operating a business.  Other than obtaining the required business licenses, all you need to do is to put an “open for business” sign up and you are ready to go.  The business is owned by only one individual and “dies” when the owner either stops doing business or dies.  The individual owner has unlimited liability for all obligations of the business.

Partnership.  If you have decided to go into business with other owners, you could form a partnership.  There are two kinds of partnerships:  general partnerships and limited partnerships.

In a general partnership, you and your partners will have unlimited liability for acts and obligations of the business, including those incurred by any of the partners in the business.  If you have no agreement, the partnership will be governed solely by the laws regarding partnerships in your state.  Without an agreement, if one partner dies or withdraws, the partnership terminates.

In a limited partnership, there must be at least one general partner who manages the affairs of the partnership and who will be liable for all the acts and obligations of the partnership.  The “limited partners” may not participate in the management of the partnership and are treated as investors.  They will not generally be liable for the acts and obligations of the partnership.  The partnership must file a Certificate of Limited Partnership in the state in which it wishes to organize.

In proprietorships and general partnerships, there can be serious legal consequences to the individual(s) who operate the business.  As pointed out, a sole proprietor, while “King” of the business, has unlimited liability for the obligations of the business.  General partners are entitled to their share of the business income, but also have unlimited liability.  Limited partners may not participate in management, but have limited liability.

So, what can a business owner do to limit his or her liability?

[To be continued, in Part 2, where we will discuss Corporations and LLCs, two of the more preferred ways of operating a business in order to minimize personal liability].

If you are starting a business and have any questions, please contact:

Morris R. Saunders at:

312-368-0100 or msaunders@lgattorneys.com.

Want to Get a Photography Business Started in Illinois?

Levin Ginsburg attorney, Dean Tatooles, is an avid photographer and spends the majority of his free time with others that share his passion for photography. Many photographers, like Dean, are also professionals from a wide range of disciplines. Some of those professionals are interested in marketing and possibly selling their images. To that end, Dean is frequently asked how to get a photography business started up in Illinois. Although not all encompassing, below are a few tips for getting a photography business legally up and running.

First, you should determine what type of business entity you will use. In Illinois, the two most common types of business entities used by photographers are limited liability companies (“LLCs”) and corporations. An LLC provides a business structure that can combine “pass-through taxation” like a partnership, with the limited liability protection of a corporation. A corporation also provides for limited liability and can provide other tax benefits that an LLC cannot provide.

Then you should choose a name in which you desire to conduct your business. You could use your own name (“Jonathan Dough Photography”) or you may prefer to use a different name (“Sunshine Photography”). If you are incorporating or organizing an LLC, then you need to determine whether a particular business name is available. You can visit the Illinois Secretary of State’s name search website at http://www.ilsos.gov/corporatellc/. A desired business name must be recognizably different from others, which are already on-file. If you are operating as a general partnership or a sole proprietorship, then you need to check the county records where the business is located.

Once you have created a name for your business and have determined the type of business entity (we will presume you have elected to be either an LLC or a corporation), it is time to make the photography business official with the state of Illinois.

An LLC’s name in Illinois must end with the words “Limited Liability Company”, “L.L.C.”, or “LLC.” Similarly, any domestic corporation’s name in Illinois must include either “Corporation”, “Company”, “Incorporated”, “Limited”, or an abbreviation of any of these words. An LLC may be the easiest route to go as it does not have the extensive corporate formalities and requirements of a corporation but offers, among other things, the limited liability protection of a corporation.

Often times, photography businesses operate under a “trade name” after they are formed. If an entity conducts with a name other than the name officially registered with the Illinois Secretary of State, an “Assumed Business Name Registration” must also be filed with the Illinois Secretary of State.

There is no requirement to register a photography business with the Federal government; however, it must be registered with the Illinois Department of Revenue if business is conducted in Illinois, or with Illinois customers. Once registration is complete, a certificate of registration and State Tax ID Number will be issued. These documents also serve as the business’s sales tax permit, retailer permit, and/or wholesaler permit. You may also need to register with the city and county in which you do business.

Likewise, a Federal Tax ID Number or “FEIN” is required by the Federal government to identify a business entity and is necessary to open a bank account. A business seeking to obtain a FEIN can apply for one online here at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Apply-for-an-Employer-Identification-Number-(EIN)-Online.

As a final point, a photography business requires a significant investment of both time and money. Business insurance should be secured to help minimize the risks associated with running a business and against unexpected events that may occur. If a photography business has employees, business insurance, such as worker’s compensation insurance and unemployment insurance are required.

If you have specific questions about starting up your photography business, please do not hesitate to contact us:

Dean Tatooles at:

dtatooles@lgattorneys.com or 312-368-0100

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