You have had the dream of launching your own business for years. Now, you’re ready. You already have your first IT consulting jobs set up. Or you plan to have your BBQ food truck up and running before spring. Yet, you aren’t sure what the best legal structure for your business is. Should you establish a sole proprietorship or LLC? Should you choose a partnership if you plan on launching your business with a friend?
Business structure pros and cons
The business structure you choose will have pro and cons. It will impact your taxes, how much control you have of the business and how much liability you take on with your business.
A sole proprietorship is the simplest and easiest business structure to establish. With a sole proprietorship, you run your business on your own. However, you also assume more risk when establishing a sole proprietorship. Your business doesn’t have a separate entity from yourself and you are liable for any business debts or obligations.
Many small business owners chose to form an limited liability corporation (LLC) over a sole proprietorship. By choosing an LLC, you can run your business on your own or with a partner. An LLC establishes your business as its own entity. That lowers your personal risk. If your business struggles, you personally won’t be liable for your business debts.
If you plan to run your business with a partner or partners, you may seek a partnership for your business structure. With a partnership, you may have a limited partnership or a limited liability partnership. A limited liability partnership limits all partners liabilities in the partnership. The partners won’t be responsible for each other’s debts. Many attorneys and health care providers choose to form partnerships.
Finally, if your business succeeds and grows, you may consider changing its business structure to become a corporation. Corporations are allowed to raise funds through the sale of stock and are completely separate from their owners and stockholders. However, corporations do pay taxes on their profits and require more record keeping and reporting.
Getting help with your business’ legal needs
Entrepreneurs should consult an experienced business law attorney as they work to launch their business. An attorney can advise you on what type of business structure to choose and help you take care of your business’ other legal needs.
It’s important to launch your business in the right way. With the help of a business attorney, you can avoid legal mistakes that could negatively impact your business in the future.