One of the most important decisions that must be made when starting a business is choosing the best business structure for your company. But how do you know which business form to select? The decision is an important one because it will impact how much the business pays in taxes, the nature of the paperwork it must complete, your personal liability in the event the business is subjected to litigation, as well as some other important considerations.
The best business structure for your business depends on the circumstances. None of the different business structures are necessarily better than others, broadly speaking, which is why it is important to assess under the given circumstances. The decision should be approached carefully and based on a thorough understanding of the different business types and how each may best meet the needs of your business concerning tax issues, liability issues, and record-keeping concerns.
There are several different business forms to consider, including sole proprietorship, partnership, corporation, and limited liability companies. If legal liability is a significant concern, sole proprietorship and a partnership may not be best, as those business forms may leave an owner with personal liability in the event of litigation. There are a number of different taxation options depending on the type of business form selected, including an S corporation, which can help avoid so-called double taxation. In addition, certain record-keeping requirements for different business structures may implicate costs and flexibility, so they are also important to take into account.
When making the entity form selection, it is also important to keep an eye on the future and potential changes the business may face, because it is likely, of course, that your goals for the company are associated with growth and, ultimately, its future success. Therefore, you may want to seek legal guidance in understanding how the best business form for your company can help you achieve your goals today, and in the future.
Source: Entrepreneur, "Choose Your Business Structure," accessed on Dec. 20, 2015