Common Types of Business Structures: Which One Is Right for You?
Are you planning to start a new business? If yes, one of the most important things you need to do is choose the right business structure. Your business structure will influence how you do business, your responsibilities, and how the law protects you. Taking the time to learn about the different types and getting advice from a business law firm can help you get your business off to a great start.
There are different kinds of business structures, but the main ones are sole proprietorship, partnership, corporation, and limited liability company (LLC). The pros and cons of each type are different.
Sole proprietorship
In a sole proprietorship, you are the sole owner of your business. This type of business structure is the easiest to set up and operate. With a sole proprietorship, you have complete control over the business operations and make all the decisions. However, any losses incurred are solely your responsibility.
Partnership
In a partnership, there are two or more owners. They manage the operations and share the gains or losses. Each partner contributes money, labor, and skills based on their strengths. The aim is to combine resources and skills to achieve business success. It's important to have a formal agreement that says how the business will be run and how choices will be made.
Corporation
A corporation is an independent legal entity separate from its owners (shareholders). They are subject to federal and state taxes, and their shareholders also pay taxes on the money/dividends they bring home. One of the corporations' biggest benefits is that your personal property is safe from business bills.
Limited Liability Company (LLC)
An LLC is considered a hybrid legal entity because it combines a partnership and a company. This type of business structure provides liability protection for its owners. Compared to a corporation, there is less paperwork and less of an official framework.
Choosing the correct type of entity is vital to building a successful business. Your choice can influence how people perceive your business and, more importantly, affect your legal exposure and finances.
Do you want your business to grow, have many owners, or stay small and straightforward? How do you expect to raise capital, and what are the tax consequences of your choices? These are all important questions that many new business owners must address.
The best way to make an informed decision is to speak with a trustworthy business law attorney. They're like your secret weapon for a successful business journey!
The Kentucky business lawyers at Regard Law Group, PLLC, have decades of experience helping companies and entrepreneurs with practical and efficient solutions for various business law matters, including guiding clients in choosing a business structure and developing sound workplace policies that comply with local, state, and federal regulations. Contact our office to schedule an initial consultation or get more information about our services.