How to Choose the Right Business Entity for Your New Business?
When deciding to start your new business, choosing the right types of business structures is crucial step to starting a business. Not sure which business entity you need to select? This article will help you to get a brief idea of business entity types and how to choose the right one for your new business.
Types of Business Structures:
Choosing the right business entity for the type of business you are doing will help reduce liability regarding taxes and help protect your business.
There are four common business entity types and each holds its own advantages and disadvantages. The differences of the type of business you do is determined by how the company is going to be taxed, the number of owners, share contributions, etc. With an understanding of all of the factors, you can select the best entity type for your new business. Let us get into a little more detail for entity types below.
Sole Proprietorship is one of the easiest and simplest types of business structures, where the business is owned by a single person and he/she is personally responsible for the debts and obligations of the business. This is one of the popular forms of a business structure due to its easiness and minimal cost. A sole proprietor can register his business by securing local licenses and he/she can start the business.
Partnership consists of two or more business owners. There are two types of partnerships, general and limited partnerships.
In general partnerships, all the partners will be an active member in the management of a business. Whereas in Limited Partnerships has at least one general partner, who controls the company’s day-to-day operations and he will be personally responsible for business debts and the other partners are called Limited Partners. Partnerships have more tax planning opportunities and its business set up is simple and inexpensive.
Corporations are legally separate entities and they protect your personal assets by creating a separate entity for yourself. A corporation has a much different tax structure and other benefits like transferability and flexibility in ownerships and better management structure.
S- Corporation, or Small Business Corporation
S Corp offers limited financial obligation for management and shareholders. It allows flow-through taxation, where profits are shared with shareholders, who are taxed on profits at their personal level.
Limited Liability Company – LLC
LLC or Limited Liability Company is one of the most popular company structure because of its liability protection and flexibility in respect to taxes and process. The elemental characteristics and LLC shares with a Corporation, limited liability and with a Partnership is the availability of pass-through taxation.
LLC provides more legal safety for you and your business. Forming an LLC may additionally help a new business to establish credibility with potential clients, employees, companies, and partners.
Ready to form your business? Start an LLC in Nevada online now.