How To Choose a Corporate Structure For Your Business
One part of starting a business that owners struggle with sometimes is choosing a structure. There are a few to choose from, all with their pros and cons. Proper research can help you pick a type that will serve your business well and give you any needed benefits. If you are new to entrepreneurship or are considering changing your business structure, here are some tips to help you choose the right one.
Look At the Number of Owners
There are many options if you intend to be the only person working at your business. You may want to choose a sole proprietorship, the simplest corporate structure you can choose. These are often where business owners start because they are so easy to set up.
However, you may also want to form a different structure, like a partnership or limited liability corporation. All types can have just one person, so if you are the only owner, feel free to try out different ones.
Decide How Much Liability You Want
While a sole proprietorship is the easiest to set up, it has a disadvantage. If something happens in your business, you have unlimited personal liability. It can cause financial hardship, which is why many growing entrepreneurs choose an LLC or other structure that limits their liability.
However, fees are associated with any other type of corporate structure, so keep this in mind if you want to consider changing your business setup. Choosing the correct one can help you avoid costly financial problems and help your business run smoothly.
Think About Your Tax Setup
One other thing to consider is how you want to do your taxes. Each structure has a slightly different tax setup, so consider this before choosing one. Sole proprietorships require you to fill out self-employment and personal tax forms. A different structure, like a B-corp or C-corp, requires corporate taxes.
Something like a non-profit is tax-exempt, but you cannot distribute profits from the corporation. If you are unfamiliar with taxes, consult a professional for help. They can tell you the pros and cons of each kind and advise you on your taxes.
Choosing a structure for your business does not have to be challenging, but you should research it before picking one. Setting up the right type can save you money and liability in the long run. Before choosing one, decide what you want out of your business. Some legal structures can benefit your business more than others.