Business Structure Attorney Alexandria VA
Choosing a Business Structure? Day-to-day operations, taxes, your ability to raise initial capital, the paperwork you need to file, how much personal asset at risk—everything your business does stems from the business structure. This only means one thing:
Choosing the correct business structure that presents the right balance of legal protections and benefits is vital.
For that reason, consulting with a business attorney, and accountant can ensure you avoid mistakes. But first, what are the type of business structures available?
Types of Business Structures
1. Sole Proprietorship
A sole proprietorship is the simplest business structure, and it comes with complete control of your business.
In all states, you automatically become a sole proprietor if you execute business activities without registering as any other kind of business.
With a sole proprietorship, you’re personally liable for the debt and obligations of the business.
The structure suits low-risk businesses and owners who desire to test a business idea before shifting to a formal company.
A partnership is the simplest legal business structure for two people to own a business together. It comes in 2 kinds:
- Limited Partnership (LP)
- Limited Liability Partnership (LLP)
Any partnership best suits business with multiple owners, professional groups (like physicians), and groups that want to test their business idea before forming a more formal company.
3. Limited Liability Company (LLC)
A Limited Liability Company structure allows an investor to take advantage of both corporation and partnership business structures.
First, it protects you from personal liability in nearly all instances of lawsuit or bankruptcy.
Secondly, profit and losses pass through personal income without facing corporate taxes. However, LLC members must pay a self-employment tax.
Third, LLC might have limited life in many states. Some states require a business to be dissolved and re-formed when admitting a new member unless the company already had an agreement within the LLC for buying, selling, and transferring ownership.
Limited Liability Company is an excellent choice for medium or higher-risk businesses, owners with significant personal assets they want to protect, and owners who wish to pay less tax than they would with a corporation.
A corporation is a legal entity that’s separate from its owner. Corporations can make a profit, get taxed, and can be held legally liable.
It offers the strongest protection to owners from personal liability, but the initial capital is higher than other structures.
What’s more, corporations pay income taxes on their profit, unlike sole proprietors, partnerships, and LLCs.
The only problem:
In some corporate, there is double taxation—fists when the company realizes profits, and another time when paying dividends to shareholders.
There are different types of corporations:
- C Corp
- S Corp—a corporation meant to avoid double taxation
- Benefit Corporation—a profit-oriented corporation
- Close Corporation—a corporate with less corporate structure and it’s share trading isn’t always public
- Nonprofit corporations—corporations organized for charity, education, or scientific work.
A Cooperative is a business owned by and operates for the benefits of those using the services. Cooperative distributes profits among the members.
Members of a cooperative have voting power to elect a board of directors and officers who run the cooperative.
Compare the general traits before settling for one legal business structure. If you need help, you can contact Mughal Law firm for free business law counseling by calling (703) 672-2165 or filling the form below.