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LLCs, LLPs, and Corporations: Part 2

LLCs, LLPs, and Corporations: Part 2

By
Michael W. Flynn
January 30, 2009

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First, a disclaimer: Although I am an attorney, the legal information in this podcast is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, I do not intend to create an attorney-client relationship with any listener.   

 

Today’s episode is part two of our discussion on the differences between LLCs, LLPs, corporations and sole proprietorships. In last week’s episode, I explained the basic differences among these entities. Now assume you are opening your own bakery. I will discuss the pros and cons of each business entity as applied to opening your bakery.    

 

First, you must create the bakery, and there are two major factors to consider: the fee associated with creating the business, and how much you must pay lawyers to help you create the business. 

 

There are no costs with the state to form a sole proprietorship or LLP. To form a corporation or LLC, you must file papers with the secretary of state. Filing fees for corporations and LLCs, including administration fees, vary from state to state, but will fall anywhere from $50 to $350. Some states will also require every business to obtain a business license or pay a publication fee. 

 

The size and scope of your business will dictate your legal fees. The more complicated the business entity, the more time it will take your lawyer to set you up. A sole proprietorship is the least complicated, LLPs are slightly more complicated, and corporations and LLCs are the most complex. A law firm specializing in startup businesses will charge in the $500-to-$5,000 range for assisting with the incorporation process. The firm can help you fill out the documents necessary for incorporating, explain the process, and review the paperwork you have filled out prior to filing. Legal costs will increase if you have multiple shareholders or complicated shareholder arrangements. The other cost of incorporating is that of paying first-year franchise taxes, which will usually land somewhere between $800 and $1,000.

 

Once you create your bakery, the major consideration is the liability you will incur while operating the bakery.

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