Entity Formation

Requirements for Articles De Facto Corporation Corporation by Estoppel

of Incorporation Not a legal LLC, but parties treat it as - equitable remedy
- name of the corporation such, as long as the following four - Where a body assumes to be a corporation and acts under a particular
- name of the registered agent elements are satisfied; name, a third party dealing with it under such assumed name is
- duration 1. proceeded in good faith estopped to deny its corporate existence.
- number of authorized shares 2. under a valid statute
- name and address of the 3. for an authorized purpose
directors 4. have executed and knowledge of * Only where the agreement is inconsistent with
- name and address of the articles of association pursuant to the mandatory statutory provisions will the members'
incorporators people agreement be invalidated*
- purpose of the corporation

Type Formation Characteristics Tax Liability

General - No writing requirement - all partners equally manage Pass through - all equally liable
Partnership -Can be implied by conduct - right and obligation to share equally in
-Parties must have legal capacity profits and losses

Limited - certificate of limited partnership - all parties make contributions Income taxed once - GP personally liable
Partnership - partnership name, office - GP’s manage and control - LP not liable
location, names & addresses of
general partners
-submit to secretary of state
Corporation - once its articles of incorporation - shareholders, officers, & directors tax on its profits as Shareholders not
are filed with the state in which - LP don’t owe fiduciary duties earned and the personally liable for debts
the corporation is formed shareholders (equity of the corporation
investors) pay a second
tax when those profits are
distributed to them
Limited Liability requires some paperwork and - Greater freedom in allocating profit and - Taxed once on its profits Liability shield for
Company filings with a state agency. Some loss for tax purposes than a corporation - can take account on members
states impose fees and taxes - investors called members their individual tax
(generally modest) on LLCs that may be managed by all its members (as in returns of any losses of
are not imposed on partnerships a partnership) or by managers, who may the LLC as those losses
or may not be members (as in a incurred
corporation)
Limited liability -by filing a document with a state - all members can participate in - once as income of the limited liability only for
partnership official management individual partnership debts arising
- requires formal partnership - may have junior partners that do not - Pass through tax from negligence and
agreement have a stake or liability similar misconduct, not
for contractual
obligations, although a
few provide protections
for both contract and tort
liabilities.
Low profit LLC Requires; - serves a socially beneficial purpose, main - Taxed once on its profits Liability shield for
1. further charitable or education goal isn’t to maximize profit - can take account on members
purposes - same structure as LLC their individual tax
no significant purpose is returns of any losses
production not income
Benefit Required articles of incorporation - commit to creating public benefit and - taxed on profits earned No personal liability for
Corporation value, while generating profit - shareholders subject to directors and officers
taxes on profits
distributed to them
Professional LLC Requires articles of organization Owned and operated by members of the - no income tax -Individuals not personally
filed with secretary of state in same profession, only offers services - pass through tax liable
which it is formed, can only be related to its profession. - no protection for
done by the license holder malpractice
Limited liability by filing a document with a state - two or more general partners & 2 or - pass through tax general partners not
limited official more limited partners personally liable
partnership
Professional Articles of incorporation - members & managers must be licensed tax on its profits as - owners not personally
Corporation to practice the same profession earned and the liable for debts and claims
shareholders (equity - no protection for
investors) pay a second malpractice
tax when those profits are
distributed to them