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Choosing the Correct Business Entity When Starting a New Company
If you are about to take the exciting step of forming a new business, you should not overlook the important decision of the type of entity your business will utilize. The business entity you select will affect every facet of your business, so you should make the decision with the aid of trusted legal professionals.
No two situations are the same. Simply because a competitor or similar business has utilized, for example, an LLC business structure does not mean that this is the right choice in your situation.
Why Business Type Matters
The law defines several types of business entities, and each has distinct features that could help or hurt your business. The type of entity selected will affect how the business is taxed, and different business entities have different requirements in terms of paperwork. The potential personal liability that a business owner may be exposed to is another key consideration. Finally, the type of entity you select will dictate how you can raise money.
Types of Business Entities
- Sole proprietorship - This is the most common way to organize a business partially due to ease of formation. While the owner has complete control over the company, the owner is also personally liable for the business.
- Partnership - This type of entity must involve two or more people. These people will share in the profits or losses of the company. The partnership does not have a tax burden; instead, the partners will report the business’ profits on their income taxes.
- Corporation - A corporation is an entity that is distinct from those who formed it. Like an individual, a corporation is taxed and is able to be held liable for its actions. Those who own the corporation typically avoid personal liability. Corporations are costly to form, and thorough record-keeping is needed. Double taxation may occur in corporations; however, this can usually be avoided by utilizing an S-corporation structure.
- Limited liability company (LLC) - An LLC allows owners to take advantage of the benefits of a corporation and a partnership structure. In an LLC, owners are usually protected from personal liability, and double taxation is avoided.
Contact a Milwaukee, WI Business Formation Lawyer
The selection of the type of entity for your business is an important decision. That is why the experience and knowledge of a legal professional is crucial when forming a business. The attorneys at Gimbel, Reilly, Guerin & Brown, LLP can give you customized legal advice based on your vision for your company.
Our experienced lawyers have aided many business owners in setting up new companies. Call our Milwaukee, WI business law attorneys today at 414-271-1440 to set up your first meeting with our firm.
Sources:
https://www.entrepreneur.com/article/38822
