When starting a business, one of the first questions you will need to answer is how you should structure your business. Should you start a company? Or is filing as a limited liability company the best route? Whether launching a new bagel shop or starting a landscaping company, figure out how you should organize your business.
No one size fits all.
Every new business has a unique situation, and how someone structures their business will depend on their needs. For starters, when structuring a business, the first thing to look at is what you want your business to do and where your business will be operating. Each sector and each location has specific needs. For instance, the needs of someone based in New York City will look different than someone starting a business in Texas. There are different requirements on a state-by-state business, and location—coupled with what your business does—will dictate how your business should be structured.
Among the most popular ways to structure a business are by filing as a limited liability company (LLC) or a corporation. Both of these options ultimately reduce the personal liability of the owners, where they are only responsible for the amount they have invested into the business. Each state has its own rules with LLCs and corporation, so if someone is looking to form their business, they will need to evaluate the positives and negatives before finding the right structure.
If you decide to form a corporation, the key thing to remember is taxation. For those who want to create a C corp, they should understand that they pay taxes on income the corporation earns in addition to income they receive by either owning or working at their business. S corps do not generally pay income taxes on the income earned by the corporation; generally, the owner(s) of the business must report their company’s revenue as personal income.
Structuring your business is a huge decision when starting a business that can have significant financial and legal implications later. Before choosing a business structure, consult with an experienced business and tax attorney to discover the best path for you and your business.