Which Business Structure is Right For You?

Which Business Structure is Right For You?Before going ahead with that new business plan for your start-up, ensure you know all legalities involved, especially the different types of business structures available. The law surrounding each entity can differ from state to state (and country to country!) but generally the rules and regulations are quite similar. However, it is a good idea to seek legal advice beforehand so you are fully aware of the risks involved.  Below are some of the advantages and disadvantages of starting up a business as a corporation, limited liability company (LLC) or partnership.

Starting up as a… Corporation (equivalent to a limited company)

Setting up a corporation can be the preferred (and most beneficial) structure for employers looking to take on a large team of staff and have maximum legal protection. This type of business structure is owned by shareholders and has a board of directors.

Pros: A corporation is its own separate legal entity and is responsible for its own debt in insolvent situations, like administration or liquidation. This means, you, as a director, are protected if the corporation struggles financially.

It’s important to remember that the business owes money, not the director. If, however, directors have acted fraudulently, they will be exposed to the corporation’s liability.

Cons: There can be a lot of paperwork and filing of accounts when setting up a corporation, however this ensures everything is kept up to date and regulations as well as compliance are met. There are also higher tax fees which leads to more expensive accountancy fees.

Starting up as a… Limited Liability Company (LLC)

An LLC is a business structure that has more flexibility when it comes to taxes and regulations and is usually a good fit for small businesses. LLCs are owned by its members.

Pros: Like a corporation, you are protected against personal liability if the company enters insolvency. There is less paperwork to do as the structure is based around an informal agreement can be made when starting up and often adapted later on. An LLC can also choose how the business should be taxed

Cons: This type of entity is a fairly new structure and could be less favored than that of the ‘wise’ corporation structure. With perhaps an unfamiliar set up, investors may be more reluctant to lend.

Starting up as a… Partnership

As the name suggests, this business structure is set up with two or more partners and follows different common laws across the nation. However, there are some general rules that apply.

Pros: As structures get smaller in business size, so does the paperwork and filing of accounts. There are also fewer taxes to pay.

Cons: The big disadvantage of being in a partnership is you are personally liable for the partnership’s debt if the business falls in financial difficulty. Every partner is responsible for the entire debt, so if one partner is unable to afford the debt, creditors will look to the next partner and so on. Before going into this kind of business, drawing up a contract deeming who is liable for what is essential.

There is the option of setting up a Limited Liability Partnership (LLP). This type of formation can differ in law from state to state but is similar to a partnership. It does, however, offer more legal protection to partners if LLP becomes insolvent, hence limited liability. An LLP is essentially a cross between a partnership and a limited liability company.

Remember, you can change structures down the line if you want to. If you are unsure what the best plan of action is, be sure to get legal advice specific to your situation.

Keith Steven of KSA Group Ltd has been rescuing and turning around businesses for over 20 years and has worked with insolvency firms, turnaround funds and venture capital investors. He is also author of the site www.companyrescue.co.uk.  You can follow Keith on Google+.

Do Businesses Prefer Limited Liability Companies Or Corporations?

Limited Liability Company formations outpace Corporate formations by nearly two-to-one, so the easy answer to this question seems to be that businesses prefer LLCs. However, what works for one, or even the majority, of businesses may not be right for others. Every company faces its own unique challenges and has its own needs, and even though LLC formation is so much higher than corporate formation, that doesn’t mean that every business will be happy with a limited liability company structure.

LLCs vs Corporations

The main reason behind why LLCs continue to be so popular seems to be the ease in which an entrepreneur can run an LLC, either by themselves or with a handful of other people. Limited Liability Companies don’t require annual shareholder meetings, nor do they need meticulous notes on every debate that leads to a business decision. Corporations, on the other hand, can be a bit of a pain to run and have to contend with plenty of extra state regulations. But what sort of companies find dealing with those regulations worth the benefits of a corporate structure? And what kind of businesses do better as limited liability companies?

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5 Questions with B-Corp Innovator Lisa Fournier

Lisa Fournier, Founder of Norfolk Fair Trade Co.

Lisa Fournier isn’t your average B-Corp business owner. The founder of Norfolk Fair Trade Co., she’s also the author of “The Barnabas Effect,” an entrepreneurial blueprint for communities and entrepreneurs on how to work together to build a stronger and more successful society. It’s not often that we get to interview with business owners turned authors in the B-Corp community and today we got the chance to chat with Lisa on her entrepreneurial roots, the trends she believes will impact benefit corporations, and why her next step forward involves education on stakeholder networks.

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How are C-Corporations Taxed?

By Greg Lindberg, 1800Accountant.com Writer

Do you have plans to launch a brand new small business? Are you ready to take the dive toward a profitable and rewarding future? If you intend to become a newly crowned business owner, it is vital to ensure you know what types of business structure options exist so that you choose the one that is most appropriate for you. This includes understanding how each type of business entity is taxed. One option is to go with a C corporation, which is considered the most traditional type of business structure.

When it comes to filing federal taxes, the IRS treats C corporations as separate business entities. A C corporation can be created when there is an exchange of money or property among prospective shareholders who make up a business. This is done for the capital stock of the business. The advantage of a C corporation is that it typically can claim more tax deductions than the ones available to sole proprietorships or partnerships when calculating their amounts of taxable income. Tax deductions can lead to big savings, helping small business owners hold on to more of the income their companies bring in.

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6 Benefits of Foreign Non-Residents Filing Corporations or LLCs in the United States

It’s a question that’s much more commonly asked than you think – are there any benefits to non-U.S. residents filing corporations or LLCs in the United States or is the process so complicated that it’s best to avoid doing it? The answer is the procedure is fairly similar to what residents of the United States experience filing and that yes, there are a series of great benefits that come in doing so.
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How Much Capital Do You Need to Start Your Company?

The process of starting a business is usually associated with that of accumulating large sums for start-up capital and marketing campaigns. Businesses have now moved away from that sort of thinking and have found easier and more innovative ways to get their companies up and running without having to find an outrageous sum of money. This calls for a total change in the mindset of the budding entrepreneur and a level of commitment to the process.

Starting a Business with Zero Capital

This will be a challenging task with many hurdles to jump, but once you are dedicated to the process you will make it. Here are a few tips.

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