If you've finally decided to take the plunge into starting your own firm, you may find yourself contemplating legal alphabet soup for the first time.
LLP. LP. LLC. PS. You've seen the letters on other attorneys' shingles, but which combo is right for you?
When thinking about which type of business structure is best for your firm, you should first decide whether you're going into business by yourself or with a partner.
- How decisions will be made,
- How profits will be shared,
- How disputes will be resolved,
- How future partners will be admitted to the partnership,
- The process for buyouts, and
- What steps will be taken to dissolve the partnership when needed.
You'll most likely choose between a general partnership (the easiest form to create), a limited partnership, or a limited liability partnership. Be forewarned, not every state recognizes the limited partnership structure.
If you're turned off by the word "partnership," you might prefer to set up a Limited Liability Corporation (LLC). Many lawyers prefer the LLC structure for its tax advantages: Profits and losses can be passed through the company to its members or the LLC can elect to be taxed like a corporation.
The LLC is generally considered better for small businesses because it combines the limited personal liability of a corporation with the tax advantages of a partnership and sole proprietorship.
A final option to consider is the Professional Service Corporation (PS). A PS must be organized for the sole purpose of providing a professional service for which each shareholder is licensed. The advantage in the structure is that it limits personal liability for shareholders.
Most law schools don't teach you how to start your own business. If you're searching for answers to your small firm questions, check out FindLaw's Law Firm Management Center. It has tons of articles on everything from choosing a business structure, to financing your firm.