Choose_The_Best_Legal_Structure_For_Your_Business by paydot888

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									Choose The Best Legal Structure For Your Business

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383

Summary:
Do you know the best legal structure for your small business? Legal
structure refers to the way a business is organized. Choosing the best
legal structure for your business is critical, as it affects aspects of
your business ranging from tax payments to your personal financial
liability. The most common types of business legal structure are sole
proprietorships, partnerships, and corporations.

The most common and simplest legal structure is a sole proprietorship, or
a b...


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Article Body:
Do you know the best legal structure for your small business? Legal
structure refers to the way a business is organized. Choosing the best
legal structure for your business is critical, as it affects aspects of
your business ranging from tax payments to your personal financial
liability. The most common types of business legal structure are sole
proprietorships, partnerships, and corporations.

The most common and simplest legal structure is a sole proprietorship, or
a business owned by one person. The owner and the business are the same
entity in terms of taxation: the business profits are personal profits
and taxed as personal income. The owner is financially responsible for
business and their personal assets will be used to cover losses or debts
incurred by the business.

Two or more owners of the same business may file for partnership status.
This type of business structure is very similar to the sole
proprietorship- all partners are held financially responsible for the
debts of the business and the tax burden is borne proportionally by the
partners.

The most complex business structure, and the most difficult to obtain, is
the corporation. In a corporation, the owners and investors are separate
from the business in terms of taxation and income and are not held
entirely liable for the company's debt.

S-Corporations (Single Person Corporation) are an option for one business
owner who wants to create a corporation to save money on taxes. As the
sole employee of the business, they receive a salary out of the business
profit and pay the appropriate income tax. The rest of the business
profit they receive as a dividend payment, on which much less tax is
paid. Therefore, by separating the profit into salary and dividend, the
S-Corporation owner saves money on taxes.

When deciding on the best business structure for your business, consider
that most businesses start small, beginning as a sole proprietorships or
partnerships. These business structures require minimal paperwork and
have a simple filing process, and are best suited for smaller businesses
where there is less chance for high losses or being sued. Once your
business takes on more risk, deals with higher amounts of debt, or
requires substantially more capital, you should consider filing for
corporation status to safeguard your personal assets and have access to
more capital.

								
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