Choosing a business entity
Before you choose a business location, create a logo, or begin hiring employees for your new company, you have some other steps you must take. One of the first choices you must make as a business owner is determining which business entity is best for your new company. There are several different options for your business, each with advantages and disadvantages. Each entity also has different tax liabilities and consequences and should therefore play a large role in your entity formation analysis.
Limited liability companies (LLCs)
In an LLC, the company itself is a separate legal entity from the owners of the LLC. This means that the owners’ personal assets are not available to satisfy any business debts, which is beneficial in litigation. An operating agreement governs the life of the LLC. Business owners must register with the state to create an LLC.
In contrast to an LLC, the partners (owners) in a partnership are personally liable for any legal claims that are filed against the business. No state filing is required to form a partnership. Partners must report business income on their tax returns. They may deduct losses on their taxes as well. It is wise to have a partnership agreement in place in the event the partners ever disagree on how the business should be run.
In a sole proprietorship, the owner is personally liable for any lawsuits that are filed against the company. No state filing is required to create a sole proprietorship. Owners must pay personal income taxes based upon the sole proprietorship’s profits. Similarly, owners may deduct business losses from their taxes.
These are only a sampling of the numerous business entity types in existence. Based upon your individual business goals, a different business entity may be best for you. It is important to understand the different liabilities involved with each entity as well in case issues arise with your business.
Our attorneys guide new business owners throughout the life of their companies
Our business law attorneys have helped clients create various types of companies, including LLCs, partnerships, sole proprietorships, and other entities. Our attorneys have assisted these companies when disputes have arisen and when legal action has become necessary. We provide guidance with complicated tax concerns, with obtaining business licenses, and with determining a plan of action for your company. Our legal guidance does not stop once the business entity type has been selected. We help our clients get their business off the ground and running as well. For many of our clients, we remain available to address any concerns they may have for years to come.