Some people start their entrepreneurial journey with a sole proprietorship, conducting business under their own name and Social Security number and reporting their business taxes on their personal tax returns. However, even the smallest businesses should strongly consider forming a more sophisticated business entity. When set up and managed correctly, legal entities can shield your personal assets from business lawsuits and provide significant tax benefits.
But which business structure is right for you? Here are the common options and their respective benefits:
- Limited liability companies (LLCs) shield against personal liability when operated correctly, and offer flexibility in ownership, management and taxation options.
- Limited liability partnerships (LLPs) also offer protection against personal liability, including from other partners, but are often limited to certain professions.
- C-corporations limit your personal liability and allow you to issue stock to raise capital.
- S-corporations similarly limit liability and permit stock issuance, and allow for pass-through taxation.
- Benefit corporations have the benefits of C- and S-corporations and can appeal to investors and customers alike with their stated goals for social and environmental good.
- Non-profit corporations protect founders against liability and are exempt from property and income taxes so long as they maintain their non-profit status.
Once you know which type of business entity is best for your situation, you need to make sure the required paperwork, such as articles of organization or incorporation, are created and filed correctly and the requisite filing fees are paid. Failure to follow all applicable legal requirements can render your liability protection null and void.
While this may sound daunting, there is a simple, affordable solution. For only $145 + state filing fees, Launch by LegalShield connects you with an experienced provider lawyer that will help you select the right business structure, create all necessary paperwork and file everything with the Secretary of State or other appropriate governmental body in your state. On top of forming your entity, you get 3 months of legal support for a whole host of common business tasks you’ll need to complete beyond launching your entity.
Ready to launch?
Get started now