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Business Entities in Missouri
We counsel you on all the benefits and considerations of each business entity form available in Missouri. Then we put your plan into action to get your business up and thriving as swiftly as possible.
1. Sole Proprietorship. A Sole Proprietorship does not need to register with the Secretary of State's office. They are simply an individual carrying on a business for profit under their own name. However, if an individual uses any other name, a fictitious business name must be registered. The individual is personally liable for all debts and obligations against them. They do not enjoy the protections afforded formal business entities.
2. General Partnership. An association of two or more persons to carry on as co-owners a business for profit. Like a Sole Proprietorship, a General Partnership is not formally organized with the state and does not enjoy any liability protections. All partners are jointly and severally liable for the debts and obligations of the partnership. Jointly and severally liable means that they may be sued collectively or individually for the full amount of any claim. (However, if sued individually, that individual partner can sue the other partner(s) for their share of the liability). Likewise, each partner has full authority to make legally binding decisions on behalf of the partnership.
3. Corporation. A Corporation is a particularly formal business structure. For example, their articles of incorporation must include specific mandatory provisions, there must be a board of directors, and the directors must adopt by-laws. Corporations enjoy limited liability. Owners only stand to lose as up to the value of their investment. Other characteristics of a Corporation include
• freely transferable ownership shares,
• centralized management (shareholders are not necessarily involved in management), and
• double taxation (the Corporation is charged income tax as an entity and shareholders are taxed on profits). (R.S.Mo. § 351)
a. Close Corporation. A Close Corporation makes running a corporation of fewer than 50 employees less complicated. Close corporations do not have as many rules to abide as other Corporations. In a Close Corporation's articles of incorporation, they can elect not to have a board of directors, annual meetings, or by-laws.
b. Foreign Corporation. A Foreign Corporation already registered in another jurisdiction does not need to file articles of incorporation in Missouri. However, they must register with the Secretary of State. If the Secretary of State determines they are "transacting business" in Missouri, they must obtain a certificate of authority.
4. Non-Profit Corporation. In Missouri, Non-Profit Corporations must designate itself as either "public benefit" or "mutual benefit" corporations. Further, qualification for tax-exempt status does not take place on the state level. Instead, this determination is made directly by the Internal Revenue Service. (R.S.Mo. § 355)
5. Professional Corporation. Only individuals practicing certain licensed professions may qualify to be a shareholder of a Professional Corporation. Under Missouri law, eligible professions include: accountants; architects or engineers; attorneys at law; chiropodist-podiatrists; chiropractors; dentists; optometrists; physicians, surgeons, doctors of medicine or doctors of osteopathy; psychologists; veterinarians; registered nurses; any natural person licensed as a real estate salesperson; and physical therapists. (R.S.Mo. § 356)
6. Limited Liability Partnership. A Limited Liability Partnership protects each partner individually from the liabilities of the others. This entity is popular with licensed professionals, such as attorneys, who do not wish to be accountable for another partner's malpractice. A General Partnership can elect to become a Limited Liability Partnership. (R.S.Mo. § 358)
7. Limited Partnership. A Limited Partnership has two types of partners, general partners, and limited partners (they must have both). General partners face unlimited liability, much like a member of a General Partnership. However, limited partners are only liable for up to the amount of their investment. With this difference in liability comes a difference in control. Limited partners are essentially passive investors, while general partners make business decisions and manage the entity. (R.S.Mo. § 359)
a. Limited Liability Limited Partnership. A Limited Liability Limited Partnership (LLLP) is a type of Limited Partnership. However, an important distinction is that the general partner is not personally liable. General partners are still responsible for managing the business, but do not risk unlimited liability.
8. Limited Liability Company. Limited Liability Companies (LLC) combine the flow-through taxation of a Partnership with the limited liability of a Corporation. They encompass the best of both worlds. LLC members are only liable for the amount of their investment, ownership shares are freely transferable, and they have centralized management. However, an LLC is more flexible than a Corporation and can elect to be member managed or manager managed. Member managed operates more like a partnership with the majority voting on business decisions. Manager managed operates more like a Corporation, with only managers having equal rights in voting. Although members can still vote to designate, remove, and replace managers. (R.S.Mo. § 347)
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