1. Presented by: Darshun Kendrick, Esq.Owner of Kendrick Law Practice (KLP), LLCwww.kendricklaw.net(678) 739-8109

2. About MeOwner of Kendrick Law Practice (Lithonia, GA)Graduate of Towers High School (Decatur, GA)Graduate of Oglethorpe University, double major(Atlanta, GA)Graduate of Univ. of GA, School of Law (Athens, GA)Soon to be graduate of Kennesaw State University,M.B.A. (Kennesaw, GA)I practiced for two (2) years at a downtown law firmas a civil business litigator for large clients. 3. This Presentation: Overview1. The differences in business entities in GA;2. Pros/Cons of each business entity, including the process for settingup each; and3. My Firm. Disclaimers: Limit of Practice: I am ONLY authorized to practice law inGeorgia. What I say during this presentation ONLY should be appliedas to Georgia businesses and no other U.S. state or territory. Tax Advice: I am NOT an accountant, although I will be giving yougeneral rules about taxes for each entity. For specifics, please consulta tax professional. Copy of this presentation: To hear this presentation online with atax attorney, visit www.blogtalkradio.com/kendricklawpractice. LLP (Limited Liability Partnerships): I have found these areused inversely with LPs. 4. Trademarks, Servicemarks, Copyrightsand PatentsPatents= inventions; need a special patent attorneyfor thisTrademarks/Servicemarks=logos, words,symbols, sound, scent, i.e. anything that identifies aservice or product *(1) Registration with the statedoes NOT mean federal registration and (2)Trademarks, for protection, MUST be registered.Copyrights= expression of an idea, not the ideaitself; does NOT need registration but its a good ideaif you want to sue someone and recover statutorydamages which have a 1 year cap 5. Sole ProprietorshipProsEasy to set upNo fees to the SOSNo partners; you makeALL the decisionsConsUNLIMITED liability forthe debts of the business(because the business isyou)No partners; you makeALL the decisionsTaxationYou will declare businessprofits/losses on your1040 Schedule C.Set UpNo registration with theSOSRegistration with yourcounty for a businesslicense still may berequired 6. Limited LiabilityCompany Pros These have members not partnersand can be either member-managedor manager-managed (same liability,just differences in authority to bind) Limited liability of owners personalassets Pass-through taxation Cons Registration required with the SOS No shares are sold under thisbusiness entity so investors unable topurchase ownership share w/outbecoming a member of the LLC,which investors are hesitant to do forIRS purposes Taxation SMLLC (one person)- Like soleproprietorship; complete schedule Con Form 1040 MMLLC (2 or more persons)- Taxedas a partnership [which we willdiscuss next] NOTE: You can elect to be taxed as acorporation by filling out a form withthe IRS. [Will discuss later why youmay not want this option.] Set Up Must file paperwork with the SOS Transmittal Form Articles of Organization $100 fee Operating Agreement (not filedbut every LLC needs) Business license may be required inyour county 7. General Partnership Pros Help with the business work; Someone to bounce ideas off; and More contributed capital for start up costs; No papers to file with the SOS Cons Other personalities you have to deal with; Most investors/financial institutions willrequired signatures from ALL partners As a partner you are JOINTLY ANDSEVERALLY liable for the business debts (acreditor must go after pship assets thenBEFORE he goes after your personal assets) When partner dies, there is a possibility thatthey leave their pship share to a spouse,who then becomes your partner (This canbe taken care of through the partnershipagreement.) Investors, especially foreign investors, willNOT become partners for IRS purposes(they would have to pay tax on income) Taxation Pass through taxation- Each partner isgiven a K-1 to report any distributions ontheir taxes Set Up (Must be 2 or more persons!) Nothing WRITE A PARTNERSHIP AGREEMENT!(Understanding between the partners) Be advised! If there is no partnershipagreement, under GA Law, your partner getsHALF of ALL profits/losses, no matter theircontributed capital or the amount of work theyput in Business License may be required inrespective county 8. Limited Partnerships Pros There are two sets of partners: Generalpartners and limited partners. There is limited liability for a limitedpartner but the same financial rewards ageneral partner There is JOINT and SEVERAL liabilityamong several persons for the debts of apship (unless the pship operatingagreement states otherwise) Cons If you are a limited partner, you CANNOTparticipate in ANY business decisions oryou will be considered a general partner;general partners have the same liability asgeneral partnership (responsible for pshipdebts and can be collected againstpersonally) Filing required with SOS There are others personalities you have todeal with to make business decisions (vs.sole proprietorship and SMLLC) You have to split profits with several people(unless the pship operating agreementstates otherwise) Taxation Same as general partnership (K-1s for allpartners) Set Up Filing with SOS $100 + fee Transmittal Form LP Articles of Organization GET A LP OPERATING AGREEMENTbetween partners! Business License may be required in county 9. C Corp. Pros Limited liability (only to amount ofinvestment) Can offer securities which is attractiveto investors BEWARE of the SEC, the Securities andExchange Commission (www.sec.gov)! Default corporation when you filewith the SOS/IRS UNLESS you electto be an S. Corp, in which you mustfile special paperwork IF you qualify[next slide] Cons Double taxation (shareholders aretaxed on dividends and thecorporation is taxed) There MUST be someone on payrollto be taxed when you fill out your W-2. Taxation Double taxation NOTE: Dividends do NOT have to bedeclared; this is a decision by the BoardBUT investors will require them. Set Up File Articles of Incorporation withSOS as well as fee Articles are VERY important! Make surethey have all the statutory provisionsneeded. *Consult an attorney! Also, every corporation needs by-laws!(Although not required to be filed withthe SOS for the same reason pships andLLCs need operating agreements) Business License may be required incounty 10. S Corp.Pros No double taxation (vs. CCorp.); only SHs will be taxedvs. 40% tax on corporationAND SHs taxed individuallyCons SHs will be taxed whetherdividends are declared or not. There is a limit of 75 peoplethat can invest in a S Corp.,all of whom must beindividuals Procedures/paperwork mustbe filed with the IRS tobecome an S Corp.Taxation Only SHs are taxed (corp. isnot) but ALWAYS taxed, nomatter if dividends aredeclaredSet Up Must set up as a Ccorporation with the SOSFIRST; then change to a SCorp. with the IRS Consult with an attorney;dont play games with theIRS! No one can shut youdown FASTER than them! 11. ProfessionalCorporation Pros It looks and indicates to thepublic and investors that you area professional. Cons May be required to put your legalname and what it is you do onALL materials, i.e. KendrickLaw Practice, PC vs. Kendrick &Associates, LLC Slightly harder to set up becauseof required paperwork to proveyou are a professional You must be aprofessional(doctor, lawyer,accountant, etc.); GA statute hasa narrow definition and list ofthese. Taxation Double taxation like C Corp.because this is a regular C Corp.UNLESS you change to an SCorp. Set Up File with SOS Articles of Incorporation You need by-laws just like aregular corporation,ESPECIALLY if there are morethan 1 shareholder. Fee Transmittal form Supporting documents to prove youare a professional Business License may berequired in county 12. Other BusinessLegal IssuesLegal CreationInsurance (E&O, Malpractice, Property, ProductLiability)Taxes (Payroll, Self Employment, Local & Federal)Property Owners LiabilityWorkers CompensationFinancing (Public Offerings, Loans, Grants, AssetFinancing, AR Financing)Lease vs. Buy (contract terms, restrictions, earlytermination) 13. Business Check-ListHighlightsHighlights from Check-List (on website)1. NO SOLE PROPRIETOSHIPS!2. Name for Business1. Reserving your name with the SOS/business license DOES NOTguarantee trade marking3. Obtain business license in respective county4. Create your dream team (lawyers, accountants, etc.) tobe successful! *Dont let being cheap stop you fromsuccess.5. Business Plan! Business Plan! Business Plan!(ESSENTIAL for investors and must be crafted carefullyso as not to anger the SEC.) 14. Darshun N. Kendrick, Esq.(678) 739-8109 [office]dkendrick@kendricklaw.net