Starting a new business venture is exciting. It doesn’t matter if you are opening a dentist’s office, a boutique, a small marketing company, or a custom boot store. You’re on the verge of doing what many people can only dream of. But as you look to build your new empire from the ground up, one of the first questions you have to ask yourself is this: What type of business structure do I need?
Perhaps you’re small enough that a simple sole proprietorship makes the most sense.
Maybe you’ve narrowed your options to either an LLC or Corporation but can’t quite decide which option is better.
Or, you thought an S Corp was your best bet but are now rethinking the benefits.
Choosing the right business structure — LLC, Sole Proprietorship, Corporation, S Corp, Partnership, etc. — is important. It lays the foundation for everything that comes next, including how you are taxed, your personal liability, your ability to raise funds, and the type of paperwork you need to file. For some entrepreneurs, the decision is pretty easy. For others, it’s easier said than done as they weigh their unique set of circumstances and the pros and cons of each entity type.
While there is no one-size-fits-all solution, there are a few basic questions you can ask yourself to make your decision easier.
5 Key Questions To Ask Yourself:
1. Do I need liability protection?
Not every business structure has this critical benefit. So if you’re sued, you may be personally responsible for paying those damages if you choose to be a Sole Prop vs. an LLC. Does every business get sued? No, but it is possible. Therefore, taking a hard look at what your business entails and if liability protection is necessary from the get-go is important.
2. What are the costs?
Sole Proprietorship entities often require only an Assumed Name Certificate from the county you are doing business in, and the set-up costs associated with that are minimal. More formal business structures can be significantly more costly, including expenses from state filings and contracts to additional legal paperwork, administrative tasks, etc., as you work with the Secretary of State, the IRS, your attorneys, etc.
3. How can I minimize business taxes?
How the IRS taxes your business is determined by which business structure you choose or qualify for based on certain conditions. And some business structures offer better protection in that regard. For example, Corporations are often subject to double taxation vs. choosing to incorporate as an S Corp.
4. Do I need flexibility?
Your needs and goals, as well as those for your business, other owners, etc., may not be the same as every other entity out there. Therefore, flexibility is also a big consideration when choosing a business structure.
5. What are my future needs?
As a business owner, it’s always important to look three, five, 10, or even 15 years into the future. Where do you want your business to be? What will it look like? What protections need to be in place? The business structure you choose now will play a big role in what happens next.
Christman Daniell Attorneys, has helped hundreds of companies meet their business goals. When we sit down to talk about business formation, we will discuss your short-term and long-term goals. Every successful business venture comes down to asking one important question: What do you want to accomplish? We work to protect you and your interests every step of the way. We truly understand that there is no one-size-fits-all solution to forming a business. That’s why we will customize solutions to meet your exact needs.
Please call Christman Daniell Attorneys, for your legal needs today!
Please consult an attorney for advice about your individual situation. The material on this website and in this or any blog article we publish are for informational purposes only and do not constitute legal advice. The attorneys at Christman Daniell Attorneys, believe in tailoring legal advice and solutions to your own personal circumstances.
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