Business Structure Basics
Are you looking to set up a business? Before you start doing business, you need to consider how you will structure your businesses. The structure you choose will affect your business’ organization, taxation, and legal liability. Therefore, you need to consider the business structure that’s the best fit for you. A business attorney in Bucks County can guide you through the process.
In this post, we’ll begin by looking at business structure basics, including structure types and what to consider when choosing a structure.
Business Structure Types
There are several ways to structure a business. Choosing an appropriate structure for your business can be intimidating, especially if you’re not informed. A Bucks County business lawyer can help you understand the different types of structures.
Let’s begin with a brief overview of the different types of business structures.
Basically, a sole proprietorship is owned and operated by one person. With this structure, there’s no legal distinction between the owner and the business.
- It’s the easiest structure to set up
- Involves the lowest cost in setting up
- Less formal than other structures
- You have complete control of your business
- Taxes and income reported on owner’s tax return
- No legal separation between personal and business assets
- Personal liability for debts and business obligations
- Hard to find investors willing to invest in sole proprietorship
This structure may be right for you if you go into business with a partner or partners. Because two or more people are working together, there needs to be an agreement that includes profit/loss sharing, ownership percentages, and management responsibilities.
- Least formal structure for partnerships
- Profits and taxes passed through to owners’ personal taxes
- Liability issues
- Shared control
- The possibility for personal conflict
A Bucks County business attorney would be able to help you with creating a partnership agreement.
Limited Liability Company (LLC)
The LLC exists as a hybrid of sole proprietorship, partnership, and corporation. They provide limited liability with less formality. Taxation is passed through to members’ personal returns.
- Provides limited liability
- Business is considered a separate entity
- Separation of personal and business assets
- Allows for an unlimited number of members
- Often subject to additional taxes at the state level
- Often, LLCs have limited life in most states
- Costs more to form than a sole proprietorship or partnership
- Hard to find investors
A corporation exists as an entity separate from its owners. Usually, a corporation has shareholders that receive a dividend of the profits. The corporation pays the taxes on its income.
- Offers the strongest protection against personal liability
- Can take your business public
- Willing investors
- High cost of formation
- Most formal structure
- Possibility of double taxation
A business lawyer Bucks County can help you form a corporation.
What You Need to Consider When Choosing a Business Structure
As you can see, there are several different structures to choose from.
To choose the right structure for your business, you need to consider:
- What level of liability are you comfortable with?
- How much ownership/control do you want?
- How much time can you commit to your business?
- How do you want to be taxed?
- Are you going to want investors or to go public?
How a Business Attorney Bucks County Can Help
Seeking the advice of a business attorney in Bucks County PA can help you answer these questions. Moreover, we can help you choose the right structure. Also, we can help you create the documents you will need and will aid you in filing them.
Choosing the right business structure for your business is vital, and Olen Law Office can guide you through the process so that you do it right.