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Which Buisness Structure is Right for You?

frr_which_bus_structure_hdr.jpgmanaging-nonprofits-vs-profits-883x432.jpegWhen starting your business, you must first decide which business structure is right for you. Determining the correct structure begins by identifying how you will run your business. Decide whether it will be just you, or if you will have a partner. If it will be for profit or not for profit along with the risks, and liabilities of your business, the expenses associated with the company, your investment needs, and what your tax situation is.

A large part of deciding the best ownership structure for your company depends on what type of service or products you will provide. You need to know this so that you can determine the correct type of liability for your company. Different business structures have different levels of liability coverage, which entity you will choose will depend on your companies proposed risks. If you are planning to have a more risky business, such as a roofing company, then you will want an entity that provides limited liability to cover your personal assets from debt and lawsuit claims. This type of business structure is known as a limited liability company.

 S corporations and limited liability companies are relatively expensive compared to other entities because of the start-up costs and s_corp_vs_llc.jpegthe continued fees as you go forward. Along with the fees, these types of business structures also are required to elect officials such as president, vice president, and so forth to run the business. If your company revolves around holding property- such as a real estate investor, then you would want an LLC instead of a corporation. This is because of the tax involved with an s corporation are taxed differently and are typically higher than an LLC.

An s corporation is structured similarly to an LLC in areas such as fees associated with starting up, limited liability, and electing officials, however, with an s corporation there is more paperwork involved when starting up, and income must be allocated to owners depending on their ownership shares. With an s corporation, the owners are also required to report their corporate profit and loss on their personal tax returns whereas with an LLC the profit and loss can be allocated differently.

Sole proprietorships and general partnerships are less expensive to open as they require almost no start-up costs where it concerns paperwork and fees. There are also no specific operating rules. However, the owner or owners are personally liable for debt incurred by the company. Limited partners have limited liability for business debt so long as they do not participate in the management of the company.

partnerships-mou-768x432.jpegLimited Partnerships are slightly more expensive than a general partnership, but with a limited partnership, partners can raise funds without having to involve outside investors in the management of the business. While a limited partnership can have as many limited partners as they want, only the general partner can manage the LP and also must take on unlimited liability for the company’s debt.  A limited partnership is suitable mostly for companies that deal in real estate.

Nonprofit Corporation is different from the other structures listed as they do not pay income taxes. This type of entity is for groups organized for charitable, scientific, educational, or religious purposes. Contributions made to these kinds of charitable organizations are tax-deductible, and while the non-profit may hold property, if the corporation ends, the ownership must be transferred to another non-profit. It cannot be in the name of an individual.

10526008_957186064298685_8821874191831798002_n.jpegWith all of the different business structures to learn about, it can be hard to determine which one is right for your company. The  at Ferguson, Rawls, and Raines P.C. can assist you in determining the best entity for your business as well as help to structure the required legal documents to ensure all primary goals are met. Once the initial items are completed, we can further assist you in future negotiations of contracts, acquisitions, loan closings, and employment issues.

 

https://www.nolo.com/legal-encyclopedia/corporations-vs-llcs-29025.html

 

 

     

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