You have a great business idea, but where do you start? One of the first decisions a new business owner has to make is how their business is legally structured. The legal structure of a business determines how the business will be taxed and the owner's liability for business debts.
The most common business structures for small businesses are:
- Sole Proprietorship (one owner with no legal structure): Business Income is reported on personal tax return and owner is personally responsible for all business debts and liabilities.
- Partnership (two or more owners): Business Income is reported on owners' personal tax returns and owners are personally responsible for all business debts and liabilities.
- Limited Liability Company (LLC): Business is a separate entity from owner(s), but profits/losses are reported on owners' personal tax returns. Owners have limited personal liability for the business's debts and liabilities.
- Corporation: Business is a separate entity from the owner(s) and is taxed as its own entity. Business owners could potentially be taxed on profits distributed to them as dividends (double taxation). Owners have limited personal liability for the business's debts and liabilities.
There are many factors to consider when determining the appropriate legal structure for your business. Consulting a competent small business attorney can help to make sure you make the best decision for your business.
The small business lawyers at the Law Offices of Lakeisha R. Simms are here to help you make this critical business decision. Visit our website at www.lsimmslegal.com to schedule a business formation consultation.
The Law Offices of Lakeisha R. Simms is a law firm practicing primarily in the areas of small business law, family law, and wills & estate planning. We service clients in their businesses and in our offices located in Hillsborough and Pinellas Counties.
This is intended for informational purposes and is not intended as legal advice or a substitute for hiring an attorney. Furthermore, by sharing this information, it is in no way intended to establish an attorney - client relationship with the reader.