Are you planning to start a business? Do you know what types of legal forms are required? It is always better to first opt for legal consulting from a reliable professional.
Some of the basic types of businesses one will have to choose from are,
- Sole proprietorship
- Limited Liability Company (LLC)
The sole proprietor and partnership businesses are not independent business entities. Here one’s personal assets are at stake and considered as part of the business. This liability has to be considered well before deciding. A partnership firm will automatically make the business partners dependent on each other. Mutual trust and a high degree of understanding between the partners are essential.
Personal liability in the independent business entities like the LLC, C and S corporations is limited to the amount invested by you. Now how does one differentiate and decide on the type of business enterprise? If the new business assets are expected to appreciate over time then it is better to go for a LLC. To decide between the C and S corporation businesses one will have to consider issues relating to active and passive income and the tax that will have to be paid in the future. One will have to review long term objectives and decide on how to take the earnings out of the business; i.e. either as retained fund growth in the business or as dividends. C corporation business with lower corporate tax rate should be preferred only if you prefer the former. Avoiding double taxation is also an issue to be considered.
As laws differ from state to state, it is wise for aspiring entrepreneurs to discuss with a reliable business law authority before deciding on any type of business. You can contact Managed Outsource Solutions a BPO pioneer for legal consulting with representation in all the US states.