Your Knowledgeable North Georgia Law Firm

Your Knowledgeable North Georgia Law Firm

How do I select the best type of formation for my business?

On Behalf of | Aug 25, 2022 | Business Law And Litigation

If you’re interested in starting a business, you need to know what legal structure is going to be best. This gives your business the best chance to succeed because you’re starting out with the right foundation, and having some sort of legal structure is necessary for establishing your business, paying taxes, hiring employees and much more.

How do you know what business structure you should choose? You need to consider a lot of different factors. There are advantages to a limited liability company (LLC) over a sole proprietorship, for example, but those are only advantages to certain types of businesses. You need to know what will work best for you.

How do you want to pay taxes?

For example, consider how you’d like to handle your taxes. If you run an LLC, then the business can pay taxes on income. If you have an S corporation, a sole proprietorship or a partnership, then you can count business income and personal income together.

What liability do you want to take on?

One of the big advantages of an LLC is that your personal assets get a bit more protection. If the business goes bankrupt, you don’t have to personally pay for the debts out of your own funds. The business itself is responsible for that debt, but you’re not. With a sole proprietorship, however, you are still responsible for the debt.

What sort of hierarchy does your business use?

You also just want to consider what type of business you’re starting and who is going to be in charge. A small business with one owner is a lot simpler than a corporation with a board of directors. Both businesses can be set up to run smoothly, but very different steps are needed. A partnership, meanwhile, needs an official partnership agreement to limit disputes and other issues.

Making your decision

These are certainly not all of the factors that you want to consider, but they give you a good place to begin thinking about your business structure. Make sure you know about all of the legal options at your disposal.