Corporate Legal Structure and Investments

Today I received a phone call from a prospective client and his question was how do we structure an investment into another business?

Generally, there are two major corporate structures for small to medium sized business owners. The first major corporate structure is an S corporation. An S corporation is a corporation designed for small business owners and is limited to U.S. citizens and less than 100 shareholders. An S corporation only has one type of stock, which is voting stock and the business owners and any investors have the same type of stock.

In contrasts, the second type of major corporate structure is an Limited Liability Corporation ("LLC), which is a combination between a corporation and partnership. An LLC is similar to a partnership because it has the flexibility of a partnership and the liability protection of a corporation. Both an S corporation and LLC are flow through entities, which mean that the shareholders or owners pass taxes as though the corporate entity does not exists. Thus, shareholders and owners pay taxes on their personal income tax form as though the corporation or LLC is disregarded.

Sean Robertson is a corporate and asset protection attorney that concentrates in corporate and LLC structure planning, business law, and general legal counsel for small to medium sized businesses. Sean Robertson can be reached at 312-498-6080.