Louisiana Startup Businesses
A Louisiana startup business must be registered in the state to do business—but
first, you need to select the best type of business in Louisiana for your unique
position and priorities.
Take a look below: we've collected information about the different options you have
for types of Louisiana startups so you can determine what kind of business is best
for you.
Louisiana Sole Proprietorship
A sole proprietorship can be registered with the state as a trade name. This type
of business is the simplest Louisiana startup you can form, consisting of one individual
doing business under a name other than his or her legal name. A
sole proprietorship trade name is considered a legal extension of the individual
owner; if the sole proprietorship is sued or defaults on a debt, the owner is entirely
accountable.
Because a sole proprietorship is such a simple structure, it does not have as many
requirements placed on it as a corporation or LLC in Louisiana would. A trade name
expires, and renewals must be filed with the state in order to continue conducting
business as a Louisiana sole proprietorship.
Incorporate in Louisiana
At the moment a business incorporates in Louisiana, a new entity (a "legal person")
is formed. This legal entity, which is by default a
C corporation, is formed by filing Articles of Incorporation with the Louisiana
Secretary of State's office and receiving a charter number for use in the state.
Unless otherwise specified during filing, a Louisiana C corporation exists perpetually,
or until dissolution paperwork has been filed.
A C corporation has many abilities that a sole proprietorship does not. It can have
multiple owners, while by definition a sole proprietorship can only have one; in
fact, there is no legal limit to the amount of owners (or shareholders) a C corporation
can have, and it can issue multiple classes of stock. It can enter into contracts
on its own, keeping its owners' finances and assets legally separate from those
of the business (provided the C corporation abides by all of the
corporate formalities required of it by law). It also allows owners to deduct
health insurance premiums.
It will also experience something known as "double taxation." A Louisiana C corporation
will pay a corporate income tax to the federal government, and the remaining income
is then given to the individual owners. That income is then taxed again, this time
at the individual level as a personal income tax.
Louisiana S Corporation
Louisiana startups that wish to avoid the double taxation of a C corporation might
choose to form an
S corporation; this entity type is taxed only at the individual level as
personal income, but does not pay a corporate tax at all.
However, in return for the beneficial tax structure, a Louisiana S corporation has
stricter limits in certain other areas—there can be no more than 100 shareholders,
and unlike a C corporation, only US citizens and resident aliens are allowed to
own a stake in an S corporation.
Louisiana LLC
Forming an LLC,
or limited liability company, is a similar process as forming a corporation: Articles
of Organization, rather than Incorporation, must be filed with the Secretary of
State, and an LLC will also receive a charter number and be registered and searched
in the same corporate database.
A Louisiana LLC, like an S corporation, avoids double taxation by taxing only the
individual owners, but it is not limited to 100 owners like an S corporation (called
"members" for an LLC), nor is there a citizenship requirement in order to own a
portion of the LLC.
Nonprofit Corporation in Louisiana
A nonprofit corporation is a type of corporation in which assets are not distributed
to owners as profit, but rather put back into the corporation to improve its services
or otherwise used to further its mission.
Many nonprofit corporations
are formed with the intention to accept tax-deductible donations under section 501c3
of the Internal Revenue Code. This is a two-step process: First, the organization
must register as a nonprofit corporation in Louisiana with the Secretary of State,
and then it must apply for tax exemption with the IRS. In order to be considered
for exemption under section 501c3, the nonprofit corporation's Louisiana Articles
must include specific language related to section 501c3, as well as specify that
the organization is formed for one of the following purposes: scientific, educational,
charitable, religious, literary, prevention of cruelty to children or animals, or
amateur sporting competition.
Foreign Corporation in Louisiana
If a corporation or LLC registered in another state plans to do business in the
state, it will most likely be required to register as a foreign corporation in Louisiana
before beginning to transact business.
While the state does not define "doing business," if a
foreign corporation is found to have been doing business in Louisiana prior
to registering its foreign qualification paperwork, it may be punished with a fine;
as that fine can vary based on how long the business has been improperly doing business
in Louisiana, foreign corporations should pay close attention to the requirements
and consult a lawyer if necessary.