The decision on the form of business might be among the most crucial ones as it determines a plethora of further features of affairs – starting from management and ending with taxation. To explore the types of commercial companies to a great extent, a comparative approach may be an appropriate option. In this investigation, different kinds of firms and partnerships in the US and Lebanon will be analyzed and compared.
Limited Partnership in the US vs. Limited Partnership in Lebanon
Within the scope of the legal essence of a limited partnership, there are no notable differences between this business form in the United States and Lebanon. In both countries, a limited partnership is considered as a partnership that has two types of partners – the general and limited ones. The latter invest but do not participate in everyday decisions; nevertheless, they are not liable for the partnership’s debts. General partners govern the affairs of this partnership and bear unlimited liability.
The general partner also is able to hire a non-owner manager to conduct operations of a different character; for instance, in both the US and Lebanon, it may be the management of particular properties. Then, neither the United States, nor Lebanon requires minimum capital for the starting limited partnership; however, ones contracting with such a partnership can impose this requirement. Finally, in both countries, certain fees are to be paid during the process of registration, which varies insignificantly.
It should be stated that there is also a number of differences between limited partnerships in Lebanon and the US. They refer to the taxation process and take place mostly due to the governmental form of these countries. According to Lebanese law, “Limited partnerships are taxed at a flat rate of 17%. Distributed post-tax profits are subject to the tax on moveable capital at the rate of 10%” (“Lebanon: Individual,” 2019, para. 10).
In the US, a limited partnership is a pass-through entity, which means that it does not pay federal income taxes. However, all the incomes and losses of this partnership are imposed on the partners, each of whom states the share of these incomes and losses in the tax returns (DLA Piper, n.d.). The taxable income that is obtained by the partners retains the volume – if the partnership trades capital assets, each partner will acquire capital gain from this trade. It should be mentioned that some states require a separate flat tax from a limited partnership that possesses real estate.
Sole Proprietorship in the US vs. Establishment in Lebanon
It seems reasonable to state that a sole proprietorship is quite a widespread business form that is undertaken, usually, by beginning entrepreneurs. Such a type of business is highly encouraged in the US. The United States Small Business Administration recommends it as “the simplest and most common structure chosen to start a business” (“Sole proprietorship,” n.d., para. 1). In contrast, “There is no sole proprietorship … in the Lebanese law. The investor may establish commercial establishments … and register as a trader” (Moghaizel Law Offices, n.d., p. 20).
Nevertheless, the legal systems of the US and Lebanon tend to demonstrate a similar approach to understanding such kind of business conducting. Both in the United States and Lebanon, there is no legal action needed to establish the sole proprietorship or the commercial establishment, respectively. This business form is considered rather as an asset than a separate legal entity in the mentioned countries. One who decides to run the sole proprietorship or the commercial establishment will be responsible for all debts and liabilities.
However, there are also some differences between the business forms described. In the United States, it seems that the legal actions related to the sole proprietorship are less complicated in comparison with the commercial establishment in Lebanon. For instance, Lebanese commercial law does not allow to hold a bank account in its own name – this account is to be held in the owner’s name. The latter restriction is not a characteristic of the US. Then, Lebanese law indicates relatively exhaustive and specific provisions regarding the sale, mortgage, and rental of the commercial establishment, which is not specified in US law to such an extent.
LLC in the US vs. SARL in Lebanon
It should be claimed that despite the fact that there is a difference in the names of LLC in the US and SARL in Lebanon, the nature of these business forms is similar. The name LLC is even also used in Lebanon, although not as often as SARL. According to both US and Lebanese law, an LLC is an entity owned by individuals or entities – each of them has limited liability. Then, “the company’s capital is divided into parts [or units] rather than shares” (“Doing business in Lebanon,” 2015, p. 5). In both countries, the bankruptcy of an LLC does not mean the bankruptcy of partners as business and personal assets are separated.
Nevertheless, there are several substantial differences between LLC and SARL. First, in the US, there is no requirement for minimum capital, while in Lebanon, the sum is 5 000 000 LBP (“Commercial companies in Lebanon,” n.d.). Second, the minimum number of participants in a SARL is 3, while in an LLC – 1. In the US, an LLC can be taxed as a partnership or a corporation, or be disregarded as an entity separate from its owner in the case one member owns it. In Lebanon, there is double taxation that is calculated as a percent on company profits plus a percent on dividends. Thus, it should be noted that an owner of an LLC in the United States is able to choose in which way his or her business will be taxed. The latter allows assuming that the US offers more favorable conditions for establishing an LLC.
Corporation in the US vs. SAL in Lebanon
In the framework of US corporations and Lebanese SALs or joint-stock companies, there are some essential differences. It should be noticed that in the United States, generally, there are two types of corporations – C corporations and S corporations. Both of them are separate legal enentitieshowever, a C corporation is double-taxed, while an S corporation has one level of taxation. Although SALs are an association of funds too, they have no such a division but have double taxation so as the C corporation.
Then, the minimum number of shareholders for US corporations is one; for SALs – three. However, it should be mentioned that for an S corporation, there is a limitation to 100 shareholders, all of whom should be US citizens (“Choose a business structure,” n.d.) For SALs, the restriction of such a kind refers to the Board of Directors – the majority must be the Lebanese.
Furthermore, while for SALs, the minimum capital is 30 000 000 LBP (“Commercial companies in Lebanon,” n.d.), for US corporations, there is no requirement for minimum capital. The common feature is that shareholders of both SALs and corporations in the US have limited liability to the extent of their contribution. It might be summarized that the United States offers more flexible conditions for establishing the described form of business.
General Partnership in the US vs. Unlimited Partnership in Lebanon
A general, or unlimited , prdtnershipcome may be considered as the most similar business form in the United States and Lebanon (Peak, 2019; “Commercial companies in Lebanon,” n.d.). In both countries, the minimum number of participants is two, the bankruptcy of the partnersleadslead to the bankruptcy of partners, and there is a joint liability, as well as no entity-level tax on profits. Then, if one decides to transfer his or her interest, the approval of all partners is needed; moreover, there is a right of first refusal, which means that a partner is to propose the interest to the other partners first.
It seems rational to conclude that a number of substantial differences between the US and Lebanese business forms were identified. The above comparative analysis allows supposing that the United States provides more favorable business conditions if to compare with Lebanon. Such a claim is founded mostly on the fact that American law offers more favorable options within the scope of taxation and a sole proprietorship. However, it was found that a general partnership might be an acceptable variant in both countries.
- Choose a business structure. (n.d.). U.S. Small Business Administration. Web.
- Commercial companies in Lebanon. (n.d.). Jaber Law Firm. Web.
- DLA Piper. (2018). Taxation: How is each type of corporate vehicle used to invest in real estate tax?. DLA Piper Realworld. Web.
- Doing business in Lebanon: A tax and legal guide. (2015). Web.
- Lebanon: Individual–in determination. (2019). Web.
- Moghaizel Law Offices (n.d.). Guide to doing business in Lebanon. Web.
- Peak, S. (2019). What is a general partnership?. U.S. Chamber of Commerce. Web.
- Sole proprietorship. (n.d.). U.S. Small Business Administration. Web.