What is the Best Structure for Your New Business?

Although starting a new business venture is exciting, there are also many decisions to make. One of the most important is choosing the right business structure. The structure you select will impact liability, taxes, and the daily operations of your business. It is important to understand the different options available so you can make the right choice that aligns with your goals. There are many different types of business structures. Below, our Utah business law attorney outlines what these are.

Sole Proprietorships 

The simplest type of business structure is a sole proprietorship. This type of business is very easy to set up while also giving you full control. However, personal assets are not legally separate from business assets. This means if the business has debt or is sued, your personal assets are also at risk. While sole proprietorships are the simplest structure to establish, we rarely recommend them due to the significantly greater risks they carry compared to other business structures.

Partnerships 

If more than one person is involved in the business venture, a partnership may be appropriate. In a general partnership, each partner shares liability and responsibility. It is critical to have a partnership agreement that outlines the role of each partner as well as the share of profits. As with sole proprietorships, partners can be held personally liable for the obligations of the business.

Limited Liability Companies (LLCs)

Limited liability companies, also known as LLCs, have the flexibility of a partnership and the liability protection of a corporation. Business owners in an LLC are known as members, and they cannot be held personally liable for the debts incurred by the business. This structure offers flexibility in taxation and management. Due to its ease of operation and the protections it offers, LLCs are a popular choice for many small businesses.

Corporations 

Corporations are separate legal entities from their owners and so they provide the strongest legal protection from personal liability. There are different types of corporations, including S corporations and C corporations and each has its own tax implications. Corporations can increase capital by issuing stocks but they require a greater adherence to formalities as well as more paperwork.

How to Determine Which Business Structure is Right for You

There are many factors to consider when determining which business structure is right for you. These include:

• The level of liability protection you want;
• Whether you want to report profits on your personal tax return, at a corporate rate, or pass-through taxation;
• The level of control you want, and if there are others involved in starting and running the business; and
• The level of growth and expansion you want for your business.

Our Business Law Attorneys in Utah Can Help You Decide

Determining which business structure is right for you is not easy, as there are many factors to consider. At AGS Law, our Utah business law attorneys can review your options with you to help you determine which one is right for your situation today, and in the future. Call us today at 801-477-6144 or chat with us online to schedule a consultation and to learn more about how we can help with your venture.

Source:

utah.gov/business/starting/structure.html