We are all used to Pros And Cons Of Business Structure
Starting a business can be a very exciting and rewarding venture. However, it involves a lot of preparation and planning, particularly at the initial stages to ensure success. For example, a business and marketing plan must be developed, which is a written document that will help you define your business and organize your goals. Here, we will discuss the first and most important thing one should do: examine and determine the legal structure for your business. Your business structure will depend upon factors including third-party claims, tax considerations and your financial objectives.
THERE ARE BASICALLY FOUR TYPES OF BUSINESS STRUCTURES WHICH YOU SHOULD CONSIDER WHEN PLANNING YOUR BUSINESS. THESE INCLUDE SOLE PROPRIETORSHIPS, PARTNERSHIPS, CORPORATIONS AND LIMITED LIABILITY CORPORATIONS (LLC).
A sole proprietorship is owned and operated solely by one person (a spouse, if any, may be involved in the business). The owner must operate the business using his or her legal name, rather than a fictitious name or a d/b/a (doing business as).
Simple to form or create. No legal filings required. No business return to file (though some states may require the filing of an unincorporated business return).Tax reporting is simplified-profits and losses are reported on individual tax returns.
Owner not afforded protection against personal liability. If business is sued, the owner's personal assets may be at stake.
Created by to or more people who agree to share in the profits and losses of a business.
No formal organization process (other than registering the business name), but partnership agreement is highly recommended Tax reporting is simplified.
Partners do not have protection against personal liability-each partner is personally liable for the negligence and wrongdoings of the other partners' share of debts and obligations.
A legal entity formed in a particular state generally by the filling of Articles (or a Certificate) of Incorporation with the Department of State.
The corporation is treated as a separate "person" and generally shields the owners (known as shareholders) from personal liability. Familiar form which often "credentializes" a business. Corporate form helps to attract investors.
Strict corporate record keeping required-if not, corporate status can be challenged. Additional costs involved (e.g., incorporation filing fees; corporate tax return preparation)
LIMITED LIABILITY COMPANY (LLC)
A legal entity which is essentially a hybrid between a corporate and a partnership.
Affords the owners with protection against personal liability (like the corporation) coupled with preferential tax treatment (like a partnership). Failure to maintain strict record keeping will not negate the status of the LLC. Assets held in an LLC may be even greater protection to owners(as opposed to a corporation) against third-party claims.
Additional costs involved (i.e., formation filing fees). Relatively new in most states so LLC's are not widely understood by the general public and case law regarding them is limited.
It is important to remember that all businesses are not created equally. Learn as much as you can about the various business forms. Consult both an attorney and an accountant before reaching a final decision. Turn your vision into a reality. You can do it!
This article is not intended to provide legal advice. Always consult an attorney for legal advice for your particular situation.
CEO SPACE INTERNATIONAL
Founded by Berny Dohrmann over 20 years ago, CEO Space is a private entrepreneurial business club with an environment that we created for people to be able to get quick results with their business through networking, education, and resources. Berny Dohrmann recently won the 2011 Inpex Ambassador Award for tireless contribution to inventors worldwide. For a one-time tuition payment Entrepreneurs receive a Lifetime membership and one free class, as well as a lifetime of mentoring, contacts; resources, and most of all a lifetime of support for you and your business as you grow. CEO Space is certified for Continuing Education credits. You can learn about Contracts, Government Contracts, I.T., Business Planning, Licensing, Marketing, Transformational Leadership and other topics at CEO Space.
Jacqueline J. Warner, Esq. is a seasoned attorney at the national law firm of Hinman, Howard & Kattell, LLP, in White Plains, New York with over 19 years of experience with corporate, securities, real estate, and estate planning and administration matters. Attorney Warner regularly advises clients on starting and growing their business, raising capital via private offerings and negotiating a wide array of contracts. She is the author and publisher of a book entitled The Mini Legal Toolbox for Entrepreneurs and Small Business Owners and a soon to be released second book in the The Mini Legal Toolbox series entitled Raising Capital for Your Business; Understanding Private Offerings.
The Mini Legal Toolbox Website - http://www.thelegaltoolbox.com
Jackie The Legal Diva - http://www.jackiethelegaldiva.com
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For more information on CEO Space please visit http://ceospaceinternational.com/ or call CEO Space at 256.850.4700.
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