What’s the Right Structure for My Business?
Functioning without legal advice can put you under faster than you can look around for a life jacket, and one of the greatest decisions facing an entrepreneur is the structure of organizing their business. There are many times of Business structures, of which the four common types of business structures:
- Sole Proprietorship
- LLC or Limited Liability Company
When forming a business, the type of business structure should reflect the overall vision of the business starting-up and in full operation. Is a sole proprietorship an option versus a limited liability company? If I incorporate, should I pursue an S-corp versus a C-corp?
Let’s take a closer look at four top-line elements of a limited liability corporation:
• An LLC can consist of just one person or several members.
• An LLC is an enduring entity, usually separate from the member(s), and can be passed on, transferred or sold; fewer legal complications result should the owner unexpectedly die.
• Administrative operations are easier because no board of directors, shareholder meetings are required for tax purposes.
• You are not personally liable for debts incurred, or damages caused by the LLC separate from those of the business.
• Taxation is typically on profits taken out by you, not on the LLC. You may however elect to be taxed as a sole proprietor, an S-Corp or a regular C- corporation; your tax advisor can determine what is best for your particular situation.
There are additional considerations for each of the other types of business structures, and an attorney consult is important for every business owner, particularly immigrants. Of all the racial/ethnic groups including some European immigrants, Asian Americans are most likely to own their own small businesses. Typically, people with foreign origins who want to run their own business may have other assets or resources in their network and an attorney consult for the structure of their business is a smart first step in the start-up or structuring for growth in a new chapter.
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