The legal structure of your business is probably one of the top three most important things to do when starting a business. Anytime you are offering services or products to someone and you are collecting funds from them, you want to make sure you have your bases covered in the event your products or services cause harm or simply disgust with a customer. This isn't to scare you, but to protect you, so don't become anxious if you aren't sure which legal structure best fits your business. We are going to tackle each legal structure now!
Sole proprietorship- this is the easiest structure to set-up because it doesn't involve anyone else in your business, just you. You are the sole owner of the business and do not have a partner or another person who has ownership of the business. There aren't any major hoops you have to jump through to become the sole proprietor because the only person involved in the business is YOU.
Limited Liability Company (LLC)- is a relatively new legal structure of a business that offers the limited liability benefits of a corporation, but the tax breaks and operational flexibility.
Cooperative- is a business that was created and operated by the people who uses its services, solely for their benefit. The profits from this type of business structure are divided amongst its members who are called users-owners. It is typical for an elected board of directors and officers to run the business while regular members have the voting power to control the direction of the cooperative.
Corporation- also referred to as a C corporation, is an independent entity that is owned by shareholders (think Apple, Exxon, Burger King). This type of structure makes the corporation itself, and not the shareholders, liable for actions and any debts it obtains. This is one of the more complex types of legal business structures because of the number of parties that can be involved. By a corporation "going public", it is able to sell parts of it's companies through shares in stock.
Partnership- is a business where, well, there is a partner. A partnership business means that every aspect of the business is shared. From profits to losses and everything in between, the partners share it all. Think of this kind of business structure as a marriage. If you don't work at it and treat it like the valuable relationship it is, you'll lose it.
S-Corporation-this may be one of the most confusing business structures there is (okay, maybe just in my book). The S-Corporation is a special type of corporation because it has been set up via a tax election. By setting up the business this way, a corporation can avoid being double taxed. In a typical corporation, the corporation itself as well as the shareholders, are taxed.
To learn more about these legal structures and which one is right for your business, stayed tuned to the announcement of this week's Hangout session with me, Evonna, as your personalized business coach.
No comments:
Post a Comment