Business Formation

In creating new business ventures, clients of the Law Office of Ryan C. LaRiviere, LLC, frequently seek consultation regarding the proper structure for their business as well as the advantages and disadvantages of which entity. Determining the appropriate business structure is a fundamental part of running any successful business. Specific attention and consideration where necessary is focused on the following:

Sole Proprietorships

A Connecticut sole proprietorship is a straightforward form of business entity. Yet, the sole proprietor is held personally liable for any and all liabilities concerning the operations of the business. While there are no statutory requirements concerning the formation or the governance for this business entity, legal counsel would generally advise the business owner to file its tradename with the local Town Clerk’s office if the owner’s legal name is not being incorporated in the tradename and if the laws of Connecticut regulate the use and filing of the tradename.

General Partnerships

A Connecticut general partnership is a business arrangement in which two or more individuals are jointly and severally liable for all profits, losses, assets, and financial and legal liabilities of the partnership unless otherwise provided by law or agreed upon. See Conn. Gen. Stat. § 34-327. In the State of Connecticut, a general partnership is regulated by the Uniform Partnership Act (UPA), Conn. Gen. Stat. §§ 34-300-34-399. In a general partnership, each partner is treated as an agent of the partnership, and his/her acts in “apparently carrying on in the ordinary course the partnership business or business of the kind carried on by the partnership binds the partnership.” Conn. Gen. Stat. § 34-322(1). In other words, each partner is deemed to possess the authority to bind the business legally. Profit and losses are calculated based on the ratio agreed upon in a partnership agreement. Such profits are taxed as personal income for each of the partners.

Limited Liability Companies A limited liability company (LLC) is a hybrid entity that mixes parts of a partnership and corporation. An LLC offers limited liability to its owners, known as ‘member,’ for liabilities exclusively by virtue of being an owner; however, such protection does not cover direct individual liability from a contract or resulting from the owner’s wrongs. In the State of Connecticut, an LLC is regulated by the Connecticut Limited Liability Company Act (LLC Act), Conn. Gen. Stat. §§ 34-100-34-242. If a LLC is appropriately structured, the business avoids corporate-level taxation by passing through profit and losses to its owners. Owners of an LLC are a party to the contract commonly known as the operating agreement, which sets forth the owner’s corresponding rights and duties. The document is a cross between corporate bylaws and a partnership agreement. Even though Connecticut law does not mandate a written operating agreement, the agreement
  1. regulate the internal affairs and conduct of the LLC,
  2. govern relations among its members and/or managers, and
  3. provide freedom to override many of the statutory default rules outlined in the LLC Act.
The formation of an LLC is strictly governed. Consult our law firm for advice on forming an LLC and crafting an operating agreement and articles of organization for your business. Limited Liability Partnerships A Connecticut limited liability partnership (LLP) is a business arrangement in which the partners have limited liability. As such, an LLP shares some of the characteristics of corporations and general partnerships. In Connecticut, a limited partnership is regulated by the Uniform Limited Partnership Act (LPA), Conn. Gen. Stat. §§ 34-9-34-38u. Unlike a general partnership, one partner is not liable for another partner’s wrongdoing, negligence, or malfeasance. In an LLP, these partners have limited liability similar to that afforded to shareholders of a corporation. The formation of an LLP is strictly governed and, according to the LPA, requires a particular filing with the Office of Secretary of the State of Connecticut. Consult our law firm for advice on forming an LLP and crafting articles of organization and an operating agreement for your business. Corporation A Connecticut corporation is a business arrangement in which the equity owners, known as shareholders, are not personally liable for the acts or debts of the corporation, unless otherwise provided in the certificate of incorporation. See Conn. Gen. Stat. § 33-673(b). Corporations regulated by the Connecticut Business Corporation Act, Conn. Gen. Stat. §§ 33-600-33-998 (the Business Corporation Act). There are two types of corporations, C – Corporations and S – Corporations. The extent of the liability of shareholders in a C – Corporation or S – Corporation is limited to the amount of money paid for their share of stock. See Conn. Gen. Stat. § 33-673(a). Corporations have distinct legal rights and liabilities for shareholders and allow its business to be conducted as profit-seeking or not for profit. The structure of ownership is set forth within the corporation’s bylaws and shareholder agreements. For advice regarding the formation of a corporation, consult with our law firm.