September 2, 2012
By Jan Pierce, S.C.
Choosing a legal entity for your new business?
To get the ball rolling, I thought I?d start with one of the most common questions I am asked.
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Q. What type of business entity should I choose when starting my new business?
A: The simple answer, and I?m all about keeping it simple, is that you should become a limited liability company (LLC) or a corporation. Operating as a sole proprietorship is crazy. Remember the adage about not putting your eggs all in one basket? Becoming an LLC or corporation allows you to keep your business in a separate basket. And maybe more importantly, it keeps your personal assets insulated from anything that might go wrong in your business.
While tax considerations get lots of attention, what is more important is the structure and purpose of the company. For example, it makes a big difference if the company will be an operating business, or simply used to hold real estate. Equally important considerations are how many owners; the roles of those owners; how the owners expect to get paid; who will put up the cash; and who will run the show.
Corporations make excellent choices for multiple-owner companies. They offer lots of flexibility without the additional cost of extensive operating agreements required for LLCs. On the other hand, an LLC can be perfect for a simple, single-owner business.
Tax talk, like C-Corps and S-Corps, or phrases like ?disregarded entity? and ?pass-through taxation? can be confusing. Don?t let that freak you out. Unfortunately, there?s no way to get around paying taxes. The business structure is far more important. Once you?ve made the choice between an LLC and a corporation, the tax consequences will fall into place. Your lawyer and accountant can help you equalize the tax ramifications, no matter which direction you go.
Send your question to jan@janpiercelaw.com. To protect your privacy, your name will not be published.
Disclaimer: Advice in this column is general legal information and does not constitute, nor is it intended to be, legal advice.
Jan Pierce, S.C. is a law firm In Milwaukee that was founded with the belief that people can make a positive difference in the world and make a profit. The firm?s emphasis is on assisting small businesses and social entrepreneurs in all aspects of launching and managing their ventures.?
This material may not be published, broadcast, rewritten or redistributed.
Source: http://bayviewcompass.com/archives/12245
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