Business structures are important for establishing a firm or structuring a law firm differently as a solo practitioner. The reason so many law firms choose LLP, PLLC and LLC is because of the advantages. A limited liability company is an LLC. This can consist of just one member. A professional limited liability company is a PLLC. This must be formed by certain professionals including lawyers, engineers and accountants. The PLLC structure is often used by law firms in states where attorneys are not allowed to from an LLC. A limited liability partnership is an LLP. This is like a general partnership with limited liability for the debts of all partners being assumed by the other partners. A general partnership gives full liability to all partners.
The top advantage of an LLP, PLLC or LLC is the tax liability is significantly reduced. The double taxation faced by corporations is avoided. An LLP enables the partners to add their profits to personal income. The personal taxation rate will apply to these earnings. This means each partner is only paying tax on a percentage of the profits. If twenty percent of the firm is owned by a partner, they are only taxed on the twenty percent of the profits added to their income. If a PLLC or an LLC has just one member, the profits can also be passed to their personal income. For additional details please visit this site.
Solo practitioners and small law firms are well suited for forming an LLP, PLLC or LLC. Filing as a corporation requires more difficult taxation and paperwork. General partnership paperwork and one form are all that some states require for an LLP. The laws of the state should be researched prior to choosing a business structure. The question of how to form a partnership is challenging because the structure is dependent on who the company will be doing business with and the necessity of protecting the individual.
The background of the person should be verified prior to establishing an LLP, PLLC or LLC. The individual should be trustworthy and not have any excessive debt. Running a criminal background check and a credit check should be considered. It is important to understand the person business will be conducted with. The fact limited liability is established does not mean the partner cannot cause the law firm to go under. Half the battle is choosing the right business structure. It is important the agreements made with any partner are clear. They must understand the profit percentage they will be receiving. Everything should be in writing. For more information please visit here.
An exit plan is imperative. All the effort in the world does not mean the partnership will work. If things go wrong, the relationship can be dissolved if there is an agreement already in place. This agreement must be in writing. Prior to choosing a business structure for a law firm, it is important to conduct research and comprehend all the rules involved. This includes any rules specific to the state.