Choosing a Business Structure for Your Small Business
The business structure you decide to use for your business will influence everything to your taxes, day-to-day operations, and how much of your personal assets may be at risk. You need to select the business structure that provides you with the best balance of benefits and legal protections.
The business structure you choose will affect how much you pay in taxes, the paperwork you have to file, the ability you have to raise money, and your overall personal liability. It’s also important to select a business structure before registering the business with the state. It will be necessary to file for the right permits and licenses and get a tax ID number. Keep reading to learn about the most common types of business structures found here.
This is very easy to form and provides you with complete control of the business. If you do business, you are automatically thought of as a sole proprietorship if you don’t register as another type of business. With this business classification, you won’t be creating a separate business entity, which means that you and your business aren’t separate.
Another option is a partnership, which is considered the simplest structure for two or more people to have ownership of a business. There are two partnership options, including the limited partnership and the limited liability partnership.
Limited Liability Company – LLC
With an LLC, you have the ability to take advantage of the benefits that are offered to both partnership and corporation business structures. The LLC provides protection from personal liability. Both losses and profits are passed through the owner’s personal income without being subject to any corporate taxes. However, the catch is that with an LLC; you are considered self-employed, which means you must pay self-employment taxes.
Sometimes, corporations are referred to as a C Corp. This is a legal entity that is completely separate from the owners. The corporation can make a profit, it can be taxed, and the corporation itself is able to be held legally liable for various things.
You need to think about the right business structure for your business carefully to ensure that the right one is found and set up. Doing this is going to pay off and help ensure that the business meets your needs and that you get the protection desired from the structure that you choose for your business.