Business Structure Essentials
The kind of business structure you select impacts many aspects of your organization, including daily operations, tax obligations, and paperwork. Choose a business structure that balances advantages and protection.
Types of Business Structures
Each entity structure handles taxes differently. Some are taxed at both business and personal income levels. Learn about the different structures and choose the ideal one for your new business.
Sole Proprietorship
The most common business structure is a sole proprietorship. Only one person runs the business. This structure provides you with complete power. It is not a legal entity, and your firm’s assets and liabilities are mixed. A sole proprietor reports both company and personal expenses. Duties, debts, and losses are yours. So, if your business fails, you may lose your assets.
Partnerships
A general partnership has two or more members. The general partners control and direct the company, and earnings and losses are shared fairly. General partners may also co-own. To form a general partnership, prepare a partnership agreement that specifies each partner’s shareholdings. General partnership profits are only taxed once.
Generally, there are two categories of limited partners. A limited partnership requires two partners: a general partner and a limited partner. Limited partners are investors with little commercial power. The general partners share the obligations, but limited partners share the profits without taking any risks.
C-Corporation
A corporation (C Corp) is a legal entity distinct from its shareholders. Corporations are considered separate legal entities. You incorporate to evade personal accountability, but they are significantly complex. A corporation is a great way to expand your business and add additional proprietors. Profit and cash flow taxes are levied on corporations, and shareholder income is taxed similarly to corporate income.
S-Corporation
An S-corporation’s profits and losses are taxed at the owner’s personal rate, not the company’s. Stockholders must be U.S. citizens, and an S-corporation may have no more than 100 shareholders. The only people who get taxed are stockholders. By forming an S-corporation with the IRS, you may avoid paying double tax on your profits.
Limited Liability Company (LLC)
A limited liability company divides business and personal obligations, and owners share some of the tax burdens. Like a corporation, an LLC protects you while avoiding double taxation. Your business saves money by not paying two levels of corporate tax. However, LLC owners are not individually liable for the company’s debts.
Discussing Your Business Structure and Plan with a Business Lawyer San Francisco
When deciding on a business structure, a business owner must examine the elements of their business strategy. A sole proprietorship, partnership, corporation, S-corporation or LLC may have various tax obligations. The business must explore variables such as the number of shareholders, active and passive investors, principal owners and so forth. Each structure also has its own rules regarding legal paperwork and financial statements.
Certain essential items must be included in each form of business organization for their business plan. A San Francisco business attorney can guide you on what should be included in your company’s business plan for the type of structure you choose.
A business plan requires the company’s name, legal formation name, address, and contact information. The business plan must also cover the fiscal year.
Also, when applying for any company structure, it is crucial to know whether the firm will be sharing an EIN with other companies or if previous accounts need to be kept current.
Other forms may be required depending on a company’s structure. A business lawyer in San Francisco can assist you in choosing the appropriate company structure for your venture and ensure that all legal paperwork is completed and filed correctly.
How a Business Attorney in San Francisco Can Help You
A business owner must grasp an understanding of the appropriate paperwork and how to manage it while establishing their firm. A San Francisco business lawyer can assist clients in complying with federal, state, and municipal regulations surrounding new company creation.
As a San Francisco company owner, you realize that overhead and operational expenses are not the only costs. You also have to pay legal fees. From company permits and licenses to standard forms and contracts, a San Francisco business litigation attorney can help you through San Francisco law.
A San Francisco company lawyer can also assist you in establishing your business structure and any other procedures required to register with the state. The Law Firm of James M. Braden will help you design and identify the appropriate corporate structure for your firm.