Types Of Businesses An Attorney Can Help You Form

Thursday, May 28th, 2020
get professional legal help when selling a business at Brown & Fortunato

Before starting a business, you must know what TYPE of business you are making, specifically what tax entity you will be operating under. This will determine the structure of your business, investment opportunities, and even personal risk. Before you decide what type of entity to start, speak with your attorney about the following options.

Partnerships

If you and another person are seeking to start a business, this is the easiest option. Partnerships are usually simple to create and dissolve. Each partner will be responsible for their own taxes in regards to the business, reporting profits and losses on their personal tax returns.

Sole proprietorships

This type of business is started and operated by one person. The structure gives the owner complete control over the entity but can complicate personal and professional assets. Be sure to speak with an experienced corporate attorney about starting, funding, and ending this type of entity.

Limited liability companies (LLCs) and partnerships (LLPs)

These options provide a structure for business owners to be legally separated from their businesses. This protects their personal assets like a home or vehicle. Both LLCs and LLPs can be taxed as proprietorships or partnerships. These types of entities can have an unlimited amount of partners and they do not require yearly shareholder meetings, unlike some corporations.

C corporations

This type of business entity allows owners to be separated legally from their business. Starting this type of corporation requires more paperwork and profits will be taxed. This can happen when the business makes a profit and sometimes when shareholders are paid dividends. But, this structure offers the strongest protection to owners.

S corporations

Those who form this type of business typically want to avoid the double taxation that can affect C corporations. Taxes are independent of the owner’s personal finances and there is some protection of personal assets. Partners who invest in the business report their profits and losses on their personal tax returns. Yearly shareholder meetings are required and the number of shareholders the business can have is limited.

What you should consider before choosing

There are some things you will need to think about before choosing what type of business you want to form. Your attorney can help you do this.

  1. Think about who will have the final say. For partnerships, many people choose a 50/50 structure to make things easier. But, this can actually be an issue when there is a disagreement.
  2. In the event of a disagreement, how will it be handled? You can use methods like arbitration, mediation, or a trial with a jury for example.
  3. If you are forming a partnership with another person, you must decide if you can compete with each other in separate businesses.
  4. Are the supplies and products provided by your business sourced from you or a partner? Consider how this will affect the business.
  5. Think about what will happen in the event of the death of a partner, divorce, bankruptcy, or legal judgment.
  6. Who will have control and responsibility for the financial records?

Do you need assistance with forming a business?

To learn more about creating a new business entity and about your options, you need a professional attorney on your side. The experienced Finance and Corporate attorneys at Brown & Fortunato have the knowledge to assist you in making the best decision possible. You can reach us by calling (833) 228-6300 or Contacting Us by email.