Founding a new business is an awesome and exciting prospect. There are many things to consider, and you want to go about setting the company up properly right from the beginning.
One of your first decisions will be structure. Will it be a sole proprietorship? An LLC? An S corporation? The form you choose for your company will serve as the cornerstone of its foundation.
Issues to consider
When considering structure, ask yourself a few questions:
- Where will be the business location?
- Who will your customers be and where will they come from?
- Will you have a partner? Investors?
- What are your projected earnings?
- How many employees will you have?
- How much will you be paying in administrative costs?
The sole proprietorship
This is the most common business structure. There is no complicated setup and no tax ID number required. You can just begin selling your products or services and report your income and expenses on Form 1040, Schedule C.
The LLC formation
A limited liability corporation is often used for both partnerships and real estate. If you have partners in your new business, the LLC will protect each of you from the actions of the others. The LLC also provides a mechanism for documenting your agreements and the partnership terms. If you are a property owner or manager, the LLC will protect you from business issues concerning your rental properties.
The S corporation
Many small business owners like the S corporation. For one thing, officers and shareholders are not personally liable for corporate debts and liabilities. In addition, your share of the company’s net income will not be subject to self-employment tax, also known as FICA.
The successful launch
Starting a new business is not something you have to do alone. You may have many questions, not only about the proper structure but also risk assessment, regulatory compliance, contracts, employee benefits and much more. This is where an experienced attorney can be a valuable resource in helping you get your new business off on the right foot.
