Is your business set up correctly?
The three most common business entities are corporations, limited liability companies, and sole proprietorships. In this video, we spend just less than three minutes going over the basics of each one. Check it out by clicking below.
For our first video in corporate structure, we’re going to talk about commonly used business entities or company types. You may have heard of some of these business entities, you may not have heard of others and you may have no idea or you may have a lot of ideas what they actually mean. Keep in mind, each of these videos in the Georgia Car Law Authority series is going to be at most maybe two, two and a half minutes long. So I’m not going to go through a full semester of Law School Corporations class to explain some of these things.
The three most commonly used business entities (these are company types) are the sole proprietor, the limited liability company, and the corporation. The sole proprietor is actually not a registered entity. That is a person operating a business with a business name. You would see something like DBA or “doing business as” under a sole proprietor. I’m actually going to have a separate video explaining exactly what DBA is and how to properly handle a DBA in Georgia. The next one is a limited liability company or an LLC.
That’s probably the most common form of a company. The limited liability company provides more protections than the sole proprietor does. For example, if a limited liability company is sued in litigation – let’s say a dealer is sued by a customer – the owner of the LLC is not going to automatically be liable. Now, that’s something we call the corporate veil.
There is a veil over the individuals that protects them from any liability. Now, you’ll note that there is a video coming up in the series talking specifically about the corporate veil, because there are circumstances where the corporate veil can be pierced. And what that means is when the corporate veil is pierced, the owner of the company or owners of the company can actually be held personally liable. So just because the company is a registered LLC does not mean that it is automatically insulated that an owner is automatically insulated from liability.
The third most commonly used is a corporation. You would see that as INC at the end of a business name. It’s another form, like an LLC, that provides corporate protection. Most of the time, a CPA or some other accountant or tax professional can guide somebody on which entity to choose. But the most common business entities that you’ll see in this industry, at least among dealers, are sole proprietors, limited liability companies, and corporations.
For more videos on the Georgia Car Law Authority series, please visit www.georgiacarlaw.com.
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