Legal Considerations When Starting a New Business
If you are starting a new business, there are different business formations for you to consider. You want to protect your personal assets from being liable for business debts, and to structure your business in a way that brings you as many tax advantages as possible. The type of structures are very different and you should speak to an attorney to determine the best formation for your business.
Different Types of Business Formations
You may start your business with one type of structure and later, as you expand your business, change its formation. The basic ways for business formations are:
- Sole Proprietorship. This is the easiest and most common way to begin your business. You are not required to file any documents with the state. You are the only owner of the business, and you can just open your doors and begin conducting business. The downside is that your personal assets are not protected from your business losses or debts. Also, there are no tax benefits to separate.
- General Partnership. This is if you own the business with one or more other people. All partners share in the profits and losses. Your personal assets are at risk for business losses.
- Limited Liability Partnership (LLP): This is similar to a general partnership, but each partner’s profits and liabilities are limited to the percentage of investment that a partner has made into the business. There can be general partners and limited partners.
- C-Corporation. This formation separates your business and personal assets and liabilities. If your business incurs debt or other liabilities, your personal assets are protected. This requires you to file documents with the state, keep records according to state requirements, and keep your records periodically updated with the state.
- S-Corporation. This is similar to a C-corporation but with different tax rules and different rules for shareholders.
- Limited Liability Company (LLC). This requires filing documents with the state and personal assets are protected from business liabilities.
Contact us at Martinez Legal, P.C. for Assistance in Deciding on the Proper Business Formation
Each situation is different. The structure that will work for one business may not work for another one. When state law requires you to file certain documents for your business structure, you want to be sure you comply with the law so that you avoid penalties and so that you are not stuck with a business structure that does not work for you.
At Martinez Legal, P.C., we can help you decide on the best business structure for your new business. We can prepare all the legal documents and make sure you comply with all laws and regulations so that you avoid future litigation. Call or contact us to schedule a consultation.