On behalf of Kadish & Associates Law Group posted in Business Formation & Transactions on Friday, October 25, 2019.
When you start a new business, you can’t just rent a building and open the doors. Instead, you need to take care of some important paperwork to ensure that your business is legal and that you have the protections you need.
You need to carefully consider the business structure you are going to use for your business. There are several to sort through, so you have to consider your plans for the business and what type of protection you need. The type of structure you choose can also impact the way you handle taxes.
Limited liability companies (LLCs), sole proprietorships and partnerships are referred to as pass-through structures because the company doesn’t pay taxes. Instead, the owners claim the losses and profits on their personal income taxes. If you want to avoid doing this, you will have to set the business up as a corporation so that you aren’t personally responsible for the taxes.
One of the biggest factors to consider is how your business might impact your personal life. If you are in a business that comes with a risk of someone deciding to sue, you need to put a barrier between the business and your own personal assets. This isn’t possible with a sole proprietorship. You need something more substantial, such as an LLC.
It is imperative that you handle the formation documents properly so that you do have the protections in place. Starting this early in the process of getting your business started should give you ample time to consider the options and make sure you have everything in order before you accept your first customer.