Starting a business is an exciting time, but it also requires you to make some important and stressful decisions. One of the first decisions that you will need to make is the type of business structure that you want to use for your company. There are four common business structures, so you will need to evaluate which one is best for you. It is helpful to seek guidance from an experienced business attorney when you set up your business.
Common Business Structures
The structure of your business will impact your company in many ways, not the least of which when it comes to tax time. You should learn the differences between the structures and discuss your options with a skilled business lawyer.
Sole Proprietorship: A sole proprietorship is likely the easiest of options. If you are the only person who owns your business, a sole proprietorship may be a good option. It gives you complete control over your company. However, your business and personal assets and liabilities are not separate. You are allowed to obtain a trade name. The most important drawback is that you can be held personally liable for your business debts.
General Partnership: A partnership is structured for two or more people to own a business together. They may be limited partnerships (LP) or limited liability partnerships (LLP). Limited partnerships have one general partner with unlimited liability while limited liability partnerships allow each owner to have limited liability.
Limited Liability Company: A limited liability company (LLC) is an option that keeps your business and personal assets separate. It protects your personal assets should the company end up with debts. It offers the benefits of a corporation and partnership combined. LLCs may be a good choice for businesses that are medium to high risk.
Corporation: A corporation offers the highest level of protection of your personal assets against business liabilities. There are various types of corporations. In general, corporations are allowed to sell stock in the company to obtain capital. The most common types of corporations are S and C Corps.
The U.S. Small Business Administration (SBA) offers more in-depth information about business structures.
Legal Assistance for Starting Your Business
Choosing the correct business structure is a serious decision and should not be taken lightly. Think about the legal and tax considerations before you start your business. It is best to have an experienced business attorney help you choose the structure for your business and then draft the appropriate legal documents.
Every type of business should be protected with a legal business contract so that all parties understand their role in the running of the business. Every business is different and what works for one business may not work for you. It is a good idea to create a business plan first so you can better structure the business based on your current and future considerations.
To learn more about business structures and to get help starting your new company, contact our experienced legal team at Moen, Sheehan, Meyer, Ltd.today.