| Choosing the right legal structure for your company is | | | | has its own rights, privileges and liabilities separate from |
| one of the most important decisions you will have to | | | | those of the individuals who own or manage it. The |
| make when starting a business. Why is this decision so | | | | key benefit of corporate status is that promoters are |
| critical? The business structure that you choose will | | | | not faced with personal liability. The corporation itself is |
| affect how much you pay in taxes, the amount of | | | | responsible for paying its taxes and can be held legally |
| paperwork your business is required to file, the | | | | liable for its actions. The main disadvantage is that it |
| personal liability you could face and your company's | | | | costs quite a lot to form a corporation, and entails |
| ability to get funding. To help you make the right choice, | | | | extensive record-keeping and double taxation. Within |
| we've put together a primer on the available options. | | | | the corporation structure, there are two options - the |
| Types of Business Structures: | | | | traditional C corporation and the S corporation. The |
| Here's a quick look at the differences between the | | | | former is subject to double taxation but has greater |
| most common types of business entities:o Sole | | | | tax planning flexibility and can shield stockholders from |
| proprietorship - This is the most popular form of | | | | direct tax liability. The S corporation has only one level |
| business organization and as the name suggests, it is a | | | | of taxation but is subject to certain limitations, such as |
| one-person ownership. It is only natural that of all the | | | | the number and type of stockholders it can have.o |
| types, this is the simplest to set up and maintain. | | | | Limited Liability Company (LLC) - This is a type of |
| However, you will still have to comply with local | | | | business ownership that combines several features of |
| registration rules, apply for a business license or permit, | | | | corporation and partnership structures. The |
| and follow certain laws to make your business | | | | advantages of this business format are that profits |
| legitimate. In this type of structure, you are personally | | | | and losses can be passed through to owners without |
| responsible for paying income taxes and you are also | | | | taxation of the business itself and owners are also |
| liable for all business debts.o Partnership - This is a | | | | shielded from personal liability. |
| business entity involving two or more people, called | | | | Choosing a business structure can seem very |
| partners, who agree to share the responsibilities of | | | | complicated but is no so in reality. You just need to |
| running the business. Partners not only share profits but | | | | understand all the implications before making your |
| also any liabilities that are accumulated, regardless of | | | | choice. Also remember that your business does not |
| who was originally responsible for generating the | | | | have to stay with a particular structure forever - you |
| debt.o Corporation - This business structure is | | | | can always change it as the company evolves. |
| recognized as a separate legal entity. A corporation | | | | |