How Should You Structure Your Business

Last week we talked about tax planning tips and how you should review the tax structure of your business.  After your review you may discover that you need to change your business structure.  The most common business types in the United States are the sole proprietorship, general partnership, limited liability company (LLC), and corporation.  The differences between these business structures are mainly due to the degree of individual liability and how each is subject to taxes. Here are brief descriptions of the most common types of business structures to help you determine how you should structure your business.

• Sole Proprietorship - is the simplest and least expensive business structure.  The business is not taxed separately which makes filing taxes easier.  Sole Proprietor is responsible for both its assets and liabilities.
• General Partnership – two or more people equally own the business.  Each person is equally responsible for its assents and liabilities.  The business itself does not pay income tax.  Partners include their respective share of the partnership’s income or loss on their personal tax returns.
• Limited Liability Company (LLC) - can consist of a single individual (one owner), two or more individuals, corporations or other LLCs.  This structure provides the limited liability of a corporation.  Owners are protected from personal liability for company debts.  LLCs are not taxed as a separate business entity.  Profits and losses are “passed through” the business to each owner of the LLC.
• Corporation - is an independent legal entity owned by shareholders.  Corporations are more complex and cost more to establish.  Shareholders are protected from personal liability for company debts. Corporations file taxes separately from their owners.

It is very important to set up your business that is best for you.  Take some time to review the different business structures and choose the one that will meet your business goals and provide the most success.

Harper Resource Group business coaching professionals are committed to putting a plan in place that will help you achieve your business goals.

Set up an appointment today for a free business coaching session.