QUESTION ON How to Form LLC or LLP for a Start-Up Home Business
I am in the process of starting a partnership for a cleaning company. I have a partnership agreement form, and would like to know what what the principal office of the business is and who it should be.
– Jessica W, Maine
The principal business address is typically the address of one’s office or place of business. Since yours is a startup cleaning business, I will assume by your question that your work will take place at client sites and that you will not have a traditional business office (at least, not now).
This implies that you will essentially have a home-based business, as it will be from your homes that you will be conducting business (e.g. making sales calls, scheduling appointments, bookkeeping, etc.). The question then becomes: Which partner’s home address will you use for the principal business office?
If the company records will be primarily kept at your partner’s home, it makes sense to use your partner’s address. On the other hand, if most of the behind-the-scenes work will be conducted from your home, or if you will be the point of contact for important legal, tax, banking and other correspondence, then you might use your own home address.
Limited liability companies (LLCs) and limited liability partnerships (LLPs) are two types of business entities that provide limited liability protection to their owners. The nature and extent of the liability protection, however, depends on the laws of the state in which the entity is formed. The owners of an LLC are generally not liable for the debts, obligations and liabilities of the LLC. In some states, the liability protection afforded by an LLP is on par with that of an LLC. In other states, however, the LLP pales in comparison to the LLC, because the LLP might only shield the partners from the liabilities resulting from another partner’s wrongful act, ommission, negligence, etc.
In Maine, the Uniform Partnership Act addresses the nature of a partner’s liability in an LLP. §295-A-2 of the Uniform Partnership Act states, in part, that
“a partner [in an LLP] is not liable . . . for debts, obligations and liabilities . . . arising from omissions, negligence, wrongful acts, misconduct or malpractice committed by another partner, employee, agent or representative of the partnership in the course of the partnership business while the partnership is a registered limited liability partnership.”
By contrast, §645 of Title 31, Chapter 13 (“Limited Liability Companies”) states in part that
“the debts, obligations and liabilities of a limited liability company . . . are solely the debts, obligations and liabilities of the limited liability company. A member or manager of a limited liability company is not obligated personally for any such debt, obligation or liability of the limited liability company solely by reason of being a member or acting as a manager of a limited liability company.”
For purposes of this article, the sections of the statutes governing LLPs and LLCs referenced above have been substantially abridged; I recommend that you consult an attorney for a legal opinion based on a review of the complete, relevant statutes and for guidance in selecting an appropriate business structure.
LLCs are formed by filing articles of organization with the Secretary of State. LLPs are formed by filing a Certificate of Limited Liability Partnership with the Secretary of State.
Best of luck to you on your cleaning business.
I hope you…well, clean up!
Recommended Resources on How to Form LLC:
- LLC or Corporation?: How to Choose the Right Form for Your Business
- Surprisingly Simple: LLC vs. S-Corp vs. C-Corp Explained in 100 Pages or Less
- Nolo’s Quick LLC: All You Need to Know About Limited Liability Companies
- Form Your Own Limited Liability Company
- What is a Partnership: Types of Partnerships?
- What is a Limited Liability Company (LLC)?
- Choosing the Legal Structure of Your Business
- How to Form LLC as Parent Company with other Separate LLCs
- Factors to Help Decide Where to Incorporate Your Business