Forming a business in Louisiana is a complicated endeavor with a number of variables. One of the biggest decisions to be made when planning a business is to determine the type of business organization will be used. The type of organization to be used is determined by the number of owners of the business, the amount of liability they want to have to the business, and if the owners want to be able to sell shares to the public. Business law in Louisiana has different rules for each type of business.
Corporations: A Legal Business Entity
The most complicated type of business organization is a corporation. Corporations are formed when the business owners wish for the business to become its own entity. A corporation is taxed as its own entity, and the people that own a corporation have no liability for the debts or obligations of the corporation. The disadvantage of this business type is that it removes some control of the company from its original owners - shareholders of the business can vote to elect a board of director. The board in turn votes for the officers who effectively run the business.
Limited Liability Companies
Business law in Louisiana also allows for the creation of limited liability companies. Unlike the corporation, limited liability companies are considered a part of the taxes of their owners. However, owners, also known as members, of a limited liability company are not liable for the obligations or debts of the business. In some states, two or more people are required to form this type of business, but in Louisiana a single person can form an LLC.
Partnerships: Limited and General
For a more basic business type with two or more owners, consider a general partnership or limited partnerships. Both of these partnerships are business owned by two or more people. The primary difference is that in a limited partnership, some members are limited members, who primarily only contribute money and reap the rewards of the business - they have little say in how it's operated. This also limits their liability to debts and obligations of the business. In a general partnership, all partners share responsibility of the running the business, and so share equal liability.
Sole Proprietorship
The final, and most common type of business formed under business law in Louisiana is a sole proprietorship. A single owner forms this type of business; this person completely manages the business and shares full liability for its debts.
