Starting a new business can be very exciting and nerve-racking. How you set up your business can have a significant impact on how it runs and whether it succeeds. Therefore, it’s very important that you choose the right legal structure for your business entity. Here’s what to know about entities for your new business.
Sole Proprietorships
The simplest form of business entity is a sole proprietorship. Sole proprietorships are often the choice for entrepreneurs because it allows them to maintain total control of the business and doesn’t require much paperwork. Under a sole proprietorship you are the sole owner of the business, which means that while you get to reap the rewards alone, you are also responsible for any debts or liabilities. The downside of a sole proprietorship is that it lacks a legal separation between your personal assets and your business, which puts your personal assets at risk.
Partnerships
There are many different types of partnerships. The most common types are general partnerships and limited partnerships. In a general partnership, partners share equal responsibility and liability. In a limited partnership, some partners have limited liability, which somewhat protects their personal assets. Partnerships are usually a good option for businesses that have multiple owners. However, it’s extremely important that you have a well-drafted partnership agreement in order to avoid and disputes that may arise.
Corporations
Corporations, including C Corporations and S Corporations, provide the highest level of liability protection for business owners. Shareholders of a corporation are typically not personally responsible for the company’s debts or legal issues. However, corporations require more formalities and paperwork, including regular meetings, minutes, and a board of directors. The choice between a C Corporation and an S Corporation depends on factors like taxation, ownership structure, and growth goals.
Limited Liability Companies (LLCs)
Limited Liability Companies (LLCs) are extremely popular among small- and medium-sized businesses because they offer the simplicity of a sole proprietorship with the liability protection of a corporation. Owners, who are known as “members,” are not personally liable for the company’s debts or legal obligations. Also, an LLC’s profits and losses can pass through the individual members’ personal tax returns, which makes taxes much easier.
Surovell Isaacs & Levy PLC Can Help Those in VA Who Wish to Start a New Business
Selecting the right business entity is an extremely important decision that can impact your business’s success and your personal liability. It’s essential to consider factors such as your long-term goals, liability concerns, tax implications, and the number of owners involved. An attorney can help you to figure out which entity is right for your business.
At Surovell Isaacs & Levy PLC, we have experience with business law and the issues surrounding it. We will help you to set your business up for success. To learn more or to schedule a consultation, contact us today!
Posted in: Business Law