What You Need to Know About Choosing a Business Structure August 20, 2018 | Legal Blog
As a business owner, you are responsible for making serious decisions that impact your success for many years to come. One such decision is selecting the best type of business structure for your company. Does a sole proprietorship make more sense for you? What about an LLC or a partnership? Learn about each so that you can make an informed decision.
This is the most common business structure because it’s relatively simple and allows the owner to maintain total management control over the company’s daily responsibilities. However, as the owner of a sole proprietorship you are personally liable for the financial obligations of your business.
This means your own home and car are at risk if things go south. You might personally declare bankruptcy if the business can’t be revived. Due to this liability, sole proprietorships are not generally recommended for larger and established businesses.
In a partnership, two or more people share in the profits and losses of a business. This offers certain tax advantages but also places each partner personally liable for the financial obligations of the company. A partnership works best when protected by a formal partnership agreement, but still carries risks, especially if each partner invested different amounts of money and time.
A limited liability company (LLC) offers the benefits of a corporation and a sole proprietorship. Profits and losses are not taxed through the business itself, but owners are still protected from personal and financial liability in the case of legal trouble. This type of hybrid structure became available in 1977 and has since become very popular for its tax benefits.
A corporation, also known as a C corporation, is the most complex and costly business structure, but for good reason. It involves complying with far more regulations and tax specifications, but also provides significant benefits. Incorporated business owners receive excellent protection since their company’s debt is not considered their own, and a corporation can also sell stocks and raise funds. On the downside, however, are the higher legal, accounting, and tax costs.
Only an experienced business attorney can provide the guidance you need to select the best business structure for your unique situation. Call (727) 497-7821 to schedule a free consultation at The Law Office of Robert Eckard Associates, P.A. to learn more.