A brief introduction
There are many options to choose from when it comes to deciding on the best company structure for your fledgling business. While starting a new business can often seem as daunting a task as reaching the summit of Mount Everest, or bungee jumping into a crocodile den, it doesn’t necessarily have to be the case.
Entrepreneurs who are well informed and prepared for the journey ahead of them will face much less adversity and obstacles on the path towards a successful business they can call their own, or at least will be better prepared to overcome such obstacles. Some of the steps that can be taken to prepare for that journey include formulating a well thought out business plan, doing proper and in-depth research of the market you are entering into, and planning and managing your finances, milestones and goals.
Other things that can contribute to increasing the possibility of success in the business venture include, ensuring that you have the necessary and relevant business licenses and permits, and choosing the correct location for the type of business you wish to have. Preparing for the possibility of hiring employees further down the line, as well as putting in place a solid marketing and promotion program for your business to start attracting potential clients and customers are also essential to success. By progressively completing these start-up activities for your business, you’ll find that things are more likely to flow more smoothly once you go live with the business as you would have covered some important elements of success.
However, it can be argued that the one pillar on which all of the above activities rest or depend on, is a solid business or company structure.
When choosing what structure works for you
There are various company structures to choose from when starting out in business and having the correct and up to date information on them all is definitely critical to your decision-making. Each structure impacts many potential aspects of your company such as which tax liabilities you’ll be accountable for, your responsibilities as the owner of the business or company, the amount of paperwork you’d have to complete as well as personal liability and the protection of your personal assets. Choosing the correct business structure which works for you is an incredibly important decision to be made and one would be advised to seek the advice of a Dallas business attorney and other experts in the industry. By being clued in on the many paths that can be taken and the ramifications of pursuing each one, you’ll be able to make a sound and informed decision as to which path works best for that which you want to create.
Different business structure options
A business that shares multiple owners, the profits are split according to a pre-determined percentage among the owners and each of them reports this on their tax returns. Each owner also shares liability if there is an issue such as debt that arises within the business.
This is one of the most common business structures that exist. It is relatively easy to form and offers the sole owner complete managerial control of how said business is run. However, on the flip side of the coin, the owner is also solely responsible for all the financial needs of the business and will be held liable for any issues that may arise.
There are two major types of corporations, C corporations, and S corporations.
C Corporations are legally considered separate entities from the owner of the company and can have multiple classes of stock as well as unlimited shareholders. Stock can be easily explained as the company shares held by individuals or groups. C corporations are taxed twice on income, once on a corporate level and secondly as said income is distributed to the owners of the company.
S Corporations only have one class of stock and no more than 100 shareholders in the company at any given time. The corporation receives the benefits of being a corporation whilst only being taxed as a partnership would be. Therefore any profits earned are only taxed on the level of the shareholders and not on a corporate level. The only other requirements is that none of the shareholders can be another profit-only business and individual without a green card that doesn’t meet IRS (Internal Revenue Service) residency requirements for the USA.
Limited liability company:
To create an LLC in New York (Limited liability company) one has to understand that it is regarded as a hybrid business structure. LLCs are gaining rapid popularity as they not only limit the liability of their owners, which are known as members, similarly to that of a corporation but also protects the members from personal liability as profits and losses are passed through to the owners (members) without taxation of the business. LLCs have some of the benefits of both corporations and partnership forms of business structures.
By being informed and clued in on business practices and structures as well as taking the correct steps for starting up your business you’ll find that nurturing your new business could help it flourish in unexpected ways. When choosing your business structure there are a few pointers to look out for such as how concerned you are about liability.
If your company is involved in a high-risk field business operation where being the subject of a lawsuit is a higher probability then you may want to look at perhaps forming a corporation or LLC to help separate your personal assets from those of your business and protect them. An experienced New York business attorney is always a good source of advice on such matters and how best to go about it.
As a business owner, one should always take the prospect of potentially being sued or not being able to pay one’s debts very seriously and take the necessary precautions to minimize risks. Potential business owners should also look at how simple they would like to keep the paperwork and taxation of their business and choose relevant business structures and strategies accordingly.
Lastly potential entrepreneurs and business owners should realistically look at their long term goals of their business as well as the long term viability of the product or service they offer, certain structures of businesses offer faster levels of growth than others however if you wish to take things slowly and step by step it’s perfectly alright to do so in your own speed. By staying responsible and giving your business the passion it requires, you will surely help shape it into something to be proud of.