Читать книгу Go Legal Yourself! - Kelly Bagla - Страница 25

When deciding to set up a new entity for your startup, you should consider your startup's financial needs, risk, and the ability to grow. Here are some factors to consider when choosing the legal structure for your business, and always consult with your accountant, as these structures have very different tax implications:

 Complexity: How complex is your business and what entity best addresses your needs? When it comes to startup and operational complexity, nothing is simpler than a Sole Proprietorship. You simply register your company name, start doing business, report the profits, and pay taxes. However, you are personally liable for all debts of your company and it can be very difficult to procure outside funding in case you need money to purchase equipment or grow your business. Partnerships, however, require a signed agreement to define the roles and percentages of profits, but partners are still personally liable for the partnership debts. Corporations and LLCs have various reporting requirements with state and federal governments, but they offer limited liability protection for the shareholders and members.

 Liability: Is the entity you are forming protecting your personal assets from your business assets? A Corporation carries the least amount of personal liability since the law holds that it is its own entity. This means, generally, creditors can sue the Corporation but they cannot sue you personally to obtain access to your personal assets. An LLC offers the same limited liability protection but with the tax benefits of a Sole Proprietorship. If the business tax is lower than your personal tax bracket, forming an LLC is not always the best option. However, in some situations, an LLC may elect to be taxed as a Corporation. Partnerships share the liability between the partners as defined by their partnership agreement.

 Flexibility: Where is your company headed and which type of legal structure allows for the growth you envision? It is recommended that before you start your business, you should invest some time drafting a business plan. The benefits of a business plan are discussed at length in Chapter 7. Turn to your business plan to review your goals and see which structure best aligns with those objectives. Your entity should support the possibility for growth and change.

 Taxes: Will this entity provide the best tax benefits for your business? An owner of an LLC pays taxes just as a sole proprietor, whereby all the profit is considered personal income and taxed accordingly at the end of the year, unless you elect to be taxed as a corporation. As a small business owner, you want to avoid double taxation in the early stages and an LLC structure prevents that along with an S Corporation. Individuals in a partnership also claim their share of profits as personal income. Both C Corporations and and S Corporations file their own tax returns each year, paying taxes on profits after expenses, including payroll.

 Control: Who will have control over your business, and how do you maintain the majority control? If you want sole or primary control of the business and its activities, a Sole Proprietorship or an LLC might be the best choice; however, you are opening yourself up to personal liability. A Corporation has a board of directors that makes the major decisions that guide the company. It also has shareholders who have voting power. A single person can control a corporation, especially at its inception, by being the majority shareholder, but control of a company is shared with the board of directors.

 Capital Investment: Will you need outside investment money to start and run your business? If you need to obtain outside funding, such as from an investor, venture capitalist, or a bank, you may be better off establishing a Corporation. Corporations have an easier time obtaining outside funding than a Sole Proprietorship. Corporations can sell shares of stock and secure additional funding for growth, while sole proprietors can only obtain funds through their personal accounts using their personal credit or taking on partners.

 Licenses, Permits and Regulations: Will the licenses and permits be held in the name of your business? In addition to legally registering your business entity, you may need specific licenses and permits to operate. Depending on the type of business and its activities, it may need to be licensed at the local, state, and federal levels.

 Changing a Sole Proprietorship: Changing a Sole Proprietorship or a General or Limited Partnership to a Corporation or a Limited Liability Company can offer a range of advantages. Most notable is asset protection: An S or C Corporation or an LLC protects the owner's personal assets in case debts or legal judgments are claimed against the business.