You have the idea, the business plan, and may even have an estimate of just how successful your business will be. Still, you are not quite sure which business structure you should choose. Believe it or not, this is actually a very common issue among new business owners. Often, this is due to the legal and financial complexities of each structure. Get information on the basics with the following information, and then learn how an attorney can assist you with finding the right structure for your new business.
This is the most basic of all business structures, and it is often the simplest in regard to taxation. However, there are some serious limitations. You may have a hard time obtaining a business loan if you do not have good credit, and you are responsible for all of your debts, assets, and liabilities. So, if you run into financial troubles, you run the risk of losing your business. Also, in Illinois, you have to file your business with the county clerk’s office if the business is not the same as your full legal name, and you must file for a Federal Employer Identification Number if you plan to hire employees.
Partnerships, though a little more complex, are still relatively straightforward as far as taxation. Losses and profits are “passed through” the personal taxes of the partners. However, they are not personally held liable if there is an issue with debt later on down the road. Unfortunately, there is a major drawback with this particular business model: partners are taxed for profits, even if they do not directly receive them. So, if profits are used to expand the business, you still have to pay taxes on them. You also have to have at least one “general partner” who is responsible for managing the project.
Of all the business structures, corporations are often the most complex. They require extensive record-keeping, often have higher taxation, and are generally more expensive to start up. Still, they do offer the most protection when it comes to taxes and liability, should the business have financial troubles later on. An attorney can help you understand whether or not this structure is right for your business.
Limited Liability Companies
Limited Liability Companies (LLCs) mix the benefits of a corporation and a partnership. Taxation is personal, so it does not include the higher taxes of a business. However, business owners are still protected from the liability, should the business run into financial trouble later on down the road. For this reason, it is becoming one of the most popular business models among businesses with two or more partners/owners.
Deciding Which Structure is Right for Your Business
Even with all of this information, it can be difficult to determine which business structure might be most appropriate for your business. There are complex rules, regulations, and limitations for each structure, and the taxation and liability for each could be crippling, depending on the structure you choose or the nature of your business. An attorney can help you examine all of these various factors and help you understand how each one may impact your future, and the future of your business.
At Stock, Carlson, Oldfield and McGrath LLC, we work directly with business owners, partners, sole proprietors, and entrepreneurs to help them find the road to success. Committed, dedicated, and highly skilled, we can assist you with your business, right from the very start, and can even continue to protect your interests throughout the entire life of your business. To learn more about the benefits of hiring a DuPage County business law attorney, call us at 630-665-2500 today.