| Do you know the best legal structure for your small | | | | owners and investors are separate from the business |
| business? Legal structure refers to the way a | | | | in terms of taxation and income and are not held |
| business is organized. Choosing the best legal structure | | | | entirely liable for the company's debt. |
| for your business is critical, as it affects aspects of | | | | S-Corporations (Single Person Corporation) are an |
| your business ranging from tax payments to your | | | | option for one business owner who wants to create a |
| personal financial liability. The most common types of | | | | corporation to save money on taxes. As the sole |
| business legal structure are sole proprietorships, | | | | employee of the business, they receive a salary out of |
| partnerships, and corporations. | | | | the business profit and pay the appropriate income tax. |
| The most common and simplest legal structure is a | | | | The rest of the business profit they receive as a |
| sole proprietorship, or a business owned by one | | | | dividend payment, on which much less tax is paid. |
| person. The owner and the business are the same | | | | Therefore, by separating the profit into salary and |
| entity in terms of taxation: the business profits are | | | | dividend, the S-Corporation owner saves money on |
| personal profits and taxed as personal income. The | | | | taxes. |
| owner is financially responsible for business and their | | | | When deciding on the best business structure for your |
| personal assets will be used to cover losses or debts | | | | business, consider that most businesses start small, |
| incurred by the business. | | | | beginning as a sole proprietorships or partnerships. |
| Two or more owners of the same business may file | | | | These business structures require minimal paperwork |
| for partnership status. This type of business structure | | | | and have a simple filing process, and are best suited |
| is very similar to the sole proprietorship- all partners are | | | | for smaller businesses where there is less chance for |
| held financially responsible for the debts of the | | | | high losses or being sued. Once your business takes |
| business and the tax burden is borne proportionally by | | | | on more risk, deals with higher amounts of debt, or |
| the partners. | | | | requires substantially more capital, you should consider |
| The most complex business structure, and the most | | | | filing for corporation status to safeguard your personal |
| difficult to obtain, is the corporation. In a corporation, the | | | | assets and have access to more capital. |