When starting a new business, you’ll find you have a lot of choices to make. One of the most important choices is which type of legal business entity is right for you. In the United States, you have five options: Proprietorships, General Partnerships, Limited Partnerships, Corporations, and Limited Liability Companies (LLCs). Before becoming an official business, your company must be registered as one of these organization types. Each entity has pros and cons. In considering the best for your business, Legally Mine suggests you keep these two questions in mind:
1. Which entity offers the best asset protection?
The best business entity for asset protection and protection from lawsuits is a corporation, Legally Mine experts say. When a corporation is run effectively, it will protect you and other owners from the practices of the business. However, corporations also have added expenses in time and money. Corporations have some specific requirements, including annual meetings, stock ledgers, stock certificates, minutes, and corporate resolutions. They also have expenses such as filing, attorney, and accounting fees. But many business owners decide that the superior lawsuit and asset protection is worth the extra cost and effort.
Comparatively, sole proprietorships and general partnerships are easier and less expensive businesses to run. However, they offer business owners little protection. Limited Partnerships and LLCs are becoming popular options due to tax flexibility, lack of corporate requirements, and charging order protection.
2. Which entity offers the best tax requirements for my business?
How do you want your business to be taxed? You have four options: your business can be taxed as a C-corporation, S-corporation, a Partnership, or a Sole Proprietorship. If your business is turning a good profit and you’re looking for individual tax perks, being taxed as a C-corporation might be your best bet.
On the other hand, if your business loses money during the first few years, you might prefer to structure as an S-corporation or Partnership. In these organizations, losses flow from the business directly to the business owners. General Partnerships and Sole Proprietorships will have an easier (and cheaper) time calculating taxes, but they also have fewer deductions allowed. No matter which structure you chose, check with an accountant or law experts at Legally Mine to make sure you understand and follow all tax requirements.
The best option
It’s up to you to decide what entity is best for your company. In general, Legally Mine recommends Limited Partnerships and LLCs—when they have clauses outlining asset protection—as a great way to go for most people. This option provides both asset protection and charging order protection.
Need advice on asset protection for your business? Call Legally Mine for a free consultation today.
1. Which entity offers the best asset protection?
The best business entity for asset protection and protection from lawsuits is a corporation, Legally Mine experts say. When a corporation is run effectively, it will protect you and other owners from the practices of the business. However, corporations also have added expenses in time and money. Corporations have some specific requirements, including annual meetings, stock ledgers, stock certificates, minutes, and corporate resolutions. They also have expenses such as filing, attorney, and accounting fees. But many business owners decide that the superior lawsuit and asset protection is worth the extra cost and effort.
Comparatively, sole proprietorships and general partnerships are easier and less expensive businesses to run. However, they offer business owners little protection. Limited Partnerships and LLCs are becoming popular options due to tax flexibility, lack of corporate requirements, and charging order protection.
2. Which entity offers the best tax requirements for my business?
How do you want your business to be taxed? You have four options: your business can be taxed as a C-corporation, S-corporation, a Partnership, or a Sole Proprietorship. If your business is turning a good profit and you’re looking for individual tax perks, being taxed as a C-corporation might be your best bet.
On the other hand, if your business loses money during the first few years, you might prefer to structure as an S-corporation or Partnership. In these organizations, losses flow from the business directly to the business owners. General Partnerships and Sole Proprietorships will have an easier (and cheaper) time calculating taxes, but they also have fewer deductions allowed. No matter which structure you chose, check with an accountant or law experts at Legally Mine to make sure you understand and follow all tax requirements.
The best option
It’s up to you to decide what entity is best for your company. In general, Legally Mine recommends Limited Partnerships and LLCs—when they have clauses outlining asset protection—as a great way to go for most people. This option provides both asset protection and charging order protection.
Need advice on asset protection for your business? Call Legally Mine for a free consultation today.
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