123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Legal >> View Article

Choosing A Legal Structure For Your Business

Profile Picture
By Author: Mr projects
Total Articles: 80
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

There are crucial steps to achieve when starting a business. Creating a business plan, finding a location, financing, and obtaining the necessary paperwork are all fundamental. Another important task however, is the determination of the legal structure and form of a future business. Knowing whether or not to be a sole-proprietorship, LLC, partnership, or corporation is going to impact future federal and state tax obligations. Strategically choosing a legal structure is in the best interest of a future business owner. But first, the right questions need to be asked.
These questions will help clarify which type of structure to choose. Once they’re answered, take a look at the several types of legal structures below to find out which one suits your business, as well as what’s required:
What is the vision of the nature and size of your business?
How many individuals will own equity in the company?
What level of structure and formality are you willing and capable of dealing with?
What is the expected profit or loss of the business?
Will your company be vulnerable to lawsuits?
Do you need ...
... to re-invest earnings into the business?
Do you understand the tax implications of the different ownership structures?
Types of ownership structures:
Sole Proprietorship

First-time business owners usually start off with this type of structure because of its simplicity. A sole proprietorship is an extension of the business owner and profits flow into the owner’s tax return without being taxed at the business level. Having a sole proprietorship gives the owner control, but they inherit unlimited liability and become legally responsible for all debts against the business.

There’s not much you need to do to start, besides obtaining a DBA and abiding by any applicable licensing requirements. This is the least expensive form of ownership and it’s also the easiest to dissolve if things fall through.


Partnership

Entering into a partnership means two or more people share ownership of a business. They are relatively easy to set up, just like a sole proprietorship. Even though it’s not required, it’s extremely encouraged to have a partnership agreement which highlights each partner’s present and future contributions, their involvement, and arrangements for a possible liquidation.

Each partner is taxed on the income they receive from the partnership and not on a business level. All partners pay taxes on their share of the business income on their own personal tax returns. Much like a Sole Proprietorship, in a Partnership each partner inherits unlimited liability and become legally responsible for all debts against the business.


Corporation

Corporations are an entirely different entity. Unlike a partnership or sole proprietorship, corporations can be taxed. The owners of a corporation are the shareholders. The shareholders elect a board of directors who is responsible for the management, policies, and major decisions of the organization.

There are certain benefits to incorporating; including tax benefits and protection from lawsuits and liabilities. Also, with a Sub-Chapter S Corporation there are additional tax benefits.

Limited Liability Company (LLC)

The hybrid of the bunch is the LLC. Forming an LLC combines the best of a corporation and a partnership, providing the limited liability of a corporation and the tax flexibility of a partnership. The owners are considered members. Normally, the duration of an LLC is determined when the organization papers are filed. Just like in a partnership, an agreement is not required, but advised to clearly set guidelines for members.

Choosing the appropriate legal structure is imperative. But after careful consideration, the decision will be clear. So whether you choose to be a corporation or even a partnership, make sure to do the research or look for resources to help you get started with your business.

We The People is a nationally recognized directory which assists customers in locating independently owned and operated offices for various legal document preparation needs. The We the People brand has been the most trusted name in Legal Document Preparation for more than 25 years. If you need help with uncontested legal matters, our directory will help you find an office that can assist you with the preparation / typing of legal documents as well as walk you through the process.

Total Views: 272Word Count: 681See All articles From Author

Add Comment

Legal Articles

1. The Benefits Of Hiring A Collective Bargaining Attorney In Nyc
Author: indexblogger

2. Interview Waiver For Us Visa Renewal - Everything You Need To Know
Author: Hardik Shah

3. Dui Lawyer Dinwidde Va
Author: Dui Lawyer Dinwidde VA

4. The Evolution Of Content Marketing For Law Firms: Trends And Innovations
Author: jamewilliams

5. Top 5 Reasons To Hire A Labor Lawyer In New York City
Author: indexblogger

6. Bail Lawyer In Cyber Crime Case – Advocate Deepak: Your Trusted Legal Expert
Author: Advocate Deepak

7. Best Cheque Bounce Lawyer In Delhi
Author: SACHIN KASHYAP

8. How Solar Companies Are Reshaping The Investment Landscape
Author: precize

9. Budgeting For Your Uk Business Trip: Visa Fees And Expenses
Author: The SmartMove2UK

10. How To Choose The Best Ssd Attorney Near Me For Success
Author: ADVAN

11. Common Mistakes To Avoid When Applying For A Sponsor Licence
Author: Amir hsuen

12. Insurance Attorney In Dubai
Author: The Law Reporters

13. The Psychology Of Persuasion In Legal Marketing: Influencing Client Behavior And Decisions
Author: jamewilliams

14. Your Gateway To Uk Business: Guide To Uk Business Visas
Author: SmartMove2UK

15. Iim Bangalore, Iit Madras Release Joint Report On India’s Evolving Startup Incubation Landscape
Author: Dev kumar

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: