Should I Incorporate? a Small Business Owners Guide to Company Structures

Should I Incorporate? a Small Business Owners Guide to Company Structures

If you've been wondering, "Should I incorporate?", maybe we can help you. Provided here is some general information on various types of business structures.

Sole Proprietorship
A sole proprietorship is the simplest type of company structure. This type of business may be your best choice if you work alone and have no significant liability risks. You may need to obtain a business license or other paperwork, but the requirements are generally less than for other business structures.

Depending on your state laws, you may be able to operate a sole proprietorship under your name, or you may select a business name. You will probably not need a federal tax identification number, as your business taxes can be filed alongside your personal taxes, using additional forms.

A sole proprietorship generally provides no liability protection for the business owner. If anything goes wrong, you may be personally sued.

Partnership
A partnership is, in many ways, basically a sole proprietorship with multiple owners. The partnership will need a business name and a federal tax identification number. A partnership agreement must be drawn up and signed by all partners. This document must, among other requirements, contain a specific formula for division of profits between partners. The partnership agreement can be complicated, and may serve as evidence in a court of law, so it is highly recommended that you consult an attorney for assistance in drawing up the agreement.

Income from the company, in effect, passes through the partnership to the individual partners. The partnership will file tax forms demonstrating its financial performance, and a statement will sent to each partner documenting that performance and indicating that partner’s tax obligations. The partners are then responsible for paying those taxes.

A partnership, like a sole proprietorship, provides no liability protection. The partners are eligible to be sued.

Limited Liability Company
The next step for partnerships that are concerned about liability is the limited liability company. The protections offered by LLC organization vary widely between jurisdictions. Therefore, it is highly recommended that legal counsel be obtained prior to organizing as an LLC.

Corporation
A corporation is, by far, the most complicated type of business structure to organize and run. However, it is also the only structure that fully protects the owners from lawsuits against the business. This is because a corporation is considered a separate legal entity. If a lawsuit is brought, it will be against the company rather than the company owners. Of course, the owners may still be sued for their own actions, but not those of the company. Organizing a corporation requires owners to follow a complicated step by step process. Therefore, any company should retain a qualified attorney to assist with the formation of corporation.

Whichever business structure you select, there will be paperwork that must be filed and maintained. In order to free yourself up to manage your regular business duties, why not hire a Virtual Assistant such as IAC Professionals to handle the paperwork? Your VA can file papers, keep track of important dates such as the annual renewal date for certifications and licenses, and send you reminders of important tasks. With so much at stake, using a VA to keep track of the details is a sensible business decision.

If you have any questions about how to incorporate,contact us today

IAC Professionalss a single source for contracting qualified professionals to assist you with your most critical business needs.   They offer a wide range of outsourcing solution which include Accounting, Bookkeeping, Virtual Assistants, Company Formation and Business Consulting.

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