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Choosing a business structure

So, you are ready to launch a business but are not sure what type of business structure would best fit your needs. Choosing the type of business entity to create has long-term implications and will factor in to how you pay taxes and how liable you are if your business suffers losses, among related considerations.

Different business formation types offer varying benefits and drawbacks, and what works best for one type of business may not do the same for another. For example, if you are operating a roofing company or something similarly dangerous, you probably want to choose a business structure that reduces your personal liability, such as a limited liability company. If, however, your business involves working at a desk out of your own home, you may face little risk, in which case a sole proprietorship may be more appropriate. These are business structure types.

Sole proprietorships

If your business is low-risk, you may opt to go the route of a sole proprietorship, but know that this type of structure does expose you to personal liability. It is, however, relatively easy to form, and it allows you complete control over your business.

Partnerships

If you start your business with other people, you may consider a partnership. Partnerships offer tax-related advantages, but they also, like sole proprietorships, expose you to personal liability if your business falls on tough times.

Corporations

Corporations are essentially stand-alone entities, meaning this type of business structure does not expose you to personal liability. There is a lot of red tape involved in forming a corporation, however, and there is also considerable record keeping associated with this type of entity.

Limited liability companies

This structure is something of a combination of a partnership and a corporation. It protects you in terms of personal liability, and it also offers tax advantages.

The type of business structure best for you depends on several factors. To discuss your specific needs, contact an attorney.

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