| Business and Corporate Law |
| Incorporation - Different Types |
| Limited Liability Company |
| The Best Structure For Your Business |
| Business Forms |
| Shareholders Agreements |
The Best Structure for Your Business
If you have not yet decided on the best structure for your business, you may want to get information about the three different business structures, namely, sole proprietorship, partnership and corporation. Each of these business structures has its own set of benefits and downsides.
Sole Proprietorship
As its name implies, a sole proprietorship consist only of a single owner. This is the simplest business structure to operate, but it can also be very risky. If there will be legal claims or debts that your business cannot pay, you will be held personally liable by the creditors. As an owner of a sole proprietorship, you will enjoy a substantial tax advantage because you will only pay once on the business profits.
Partnership
General partnership, or simply partnership, is a more complex business structure than sole proprietorship, since it involves more than a single party. If the partnership has several partners, it may become difficult to achieve common agreement on some crucial business decisions and this may lead to divisive disputes.
Like sole proprietorship, the general partners are personally liable for the debts and legal claims of the business. Partnership enjoys a pass-through tax advantage because the entity is not subject to income taxation on its profits. All profits or losses are proportionately passed through to the individual partners, who are responsible for reporting these in their individual income tax returns.
Corporation
Corporations are more complicated and more expensive to set up than a sole proprietorship or partnership. The main benefit of a corporation is its limited liability, that is, you will not be personally responsible for the corporation's unpaid debts and other liabilities.
A corporation offers more tax benefits, such as complete separation of your personal income from business profits. But forming a corporation means that you will have to go through a lot of paperwork and recordkeeping. Depending on the nature of your business, you may find it not worth the hassles.
Other Structures
The above three business structures are the traditional means of doing business. Variants of these structures exist, and these include limited partnership, limited liability company (LLC), S corporations as opposed to regular corporations or C corporations, and the latest addition is the registered limited liability partnership.
When choosing the best structure for your business, consider one that gives you the proper balance of legal and tax protections you need, and is flexible enough to allow you to obtain future financial requirements. This is not easy to determine. Consult an expert and experienced corporate legal counsel to help you choose the best structure for your business.