The legal and financial ramifications of this decision are significant. Plus, you really can’t move forward and take important steps such as registering your name or getting your tax ID number until you’ve answered this critical question.
We must note that circumstances vary among individuals and individual businesses. Determining which of these structures is right for your business is dependent on the type of business you want to run, how many owners it has, and its financial situation. No one choice suits every business. Business owners must pick the structure that best meets their needs.
The most important factors for you to consider will include:
· the potential risks and liabilities for your business;
· the formalities and expenses involved in establishing and maintaining the various business structures;
· your income tax situation; and
· your investment needs.
Here is a brief explanation of the main options that are available:
· Sole proprietorships are the simplest of the legal structures, but they also lack many of the legal and financial protections of other business forms. Sole proprietors have the advantage of being their own boss, but also shoulder the burden of being solely responsible for the business’s success or failure.
· Partnerships are the simplest type of legal structure to form for businesses with two or more principals. The potential downside is that while partnerships have no formal paperwork requirements, they usually don’t protect partners from liability. Partnerships can be tricky if there is disagreement over work ethic, goals, or roles in business and leadership styles.
· A limited liability company (LLC) is a business structure that has features similar to both corporations and partnerships. LLCs protect the owner(s) from certain liabilities, including business debts, while the legal structure allows for a flexible management arrangement.
· Corporations are limited liability partnerships that are separate and distinct from their owners. In a corporate business structure, shareholders have the right to participate in profits, but are not held personally/financially liable for the company’s debts.
Still uncertain? No worries! Business structures can change over time. Often, businesses that start out as sole proprietorships or partnerships grow, shifting to LLCs and corporations. If your business needs and plans change, your business structure can most likely change with them. The Orlando Law Group has a team of knowledgeable dedicated attorneys on hand who can answer any questions regarding this important topic, and give you further in depth information. Call 407.512.4394 and let our team guide your process.