If you are about to start your own business, one of the first steps is choosing the type of legal structure you’d like for the company. There are many important aspects to consider when making this decision, but personal liability should be front of the line. Any business needs to consider the very real possibility of one day being involved in a lawsuit.
There are two main options to select when you’re ready to start your company. Both will protect your personal property as well as the financial future of yourself and your family.
Starting a Limited Liability Company
Also known as an LLC, a limited liability company will provide you with protections that a sole proprietorship cannot. A couple of benefits include:
- Limited personal liability. As the owner of the LLC, your liability is very limited. If a lawsuit were to occur, your personal assets including bank accounts, cars, or houses, are not at risk of being lost.
- Tax advantages. Also known as “pass-through taxation,” the owner of an LLC can claim tax losses from the business on their individual tax form. This is considered to be of great benefit if the business is the owner’s sole source of income, as fewer taxes will then need to be paid.
Starting a Corporation
If you will be starting the business with partners, or plan to have significant growth, it may be wiser to start a corporation instead of an LLC. Benefits of a corporation include:
- Limited personal liability. Just like an LLC, the corporation will protect all shareholders and board members from personal ramifications in the instance of a lawsuit.
- Outside financing. Even though you will likely invest some of your own money to start your business, the business itself will be financed through the sale of stock, which keeps your personal finances simpler and out of the way of any issues that appear.
While you will be required to follow more formalities and business procedures than an LLC, forming a corporation also yields you more protection from any business debts or liabilities.
Let Us Help You Choose the Right Business Structure for Your Needs
Whether you choose the route of forming a corporation or LLC, protecting your personal assets is essential. Save money and time by forming your business correctly on the first try—the experienced business attorneys at MacDowell Law Group are ready to help. Contact us today to schedule a consultation to discuss all of your business options.
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