Want to Start a Business? Here are Types of Entities You Can Form

Business

Starting a business is quite exciting; however, you should know how the kind of entity you form can impact your business and personal finance later on. Although there are a lot of kinds of business entities, a Clearwater commercial litigation lawyer will see the following types most often:

Head over to Aandi Lawyers if you’d like to know more about commercial litigation.

Sole Proprietorship

Forming this entity is easy and does not require state filings. But, you should stay personally liable for debts or lawsuits against your company. A lot of people choose this type of entity as they start their business as it is more affordable to form. However, this could leave you vulnerable to costly situations down the road. Thus, make sure to consider whether the risks of a sole proprietorship are worthwhile.

Limited Liability Company (LLC)

Forming this type of business entity lets you protect your personal assets from being affected by your business situations. It lets you creatively allocate the profits and losses your business will incur among owners. Also, the income the business generates is filed as part of your personal income. Thus, the profits will not be taxed separately. 

C Corporations

Just like an LLC, a C Corporation can limit the liability of company directors, shareholders, officers, and employees. It lets owners sell stocks, helping attract investors. But, with this type of business entity, there is a potential for double taxation, where both business profits and shareholder dividends are subject to taxes. In addition, this type of entity is subject to many regulations and complex tax filings. If you choose to form this entity, you need to work with an experienced busyness accountant to file your taxes. 

S Corporations

Liability and investment opportunities are also limited in S Corporations. However, double taxation does not apply here. With this entity, the profits and losses shared by owners must be reported on their personal tax returns. The income is taxed once only. An S Corporation can only be owed by legal citizens or permanent residents of the country. Also, shareholders in this entity are limited to just 100.

Partnerships

This type of business entity is a common choice among small business owners because of the ease of forming and operating. But, with this entity, partners are personally liable for business debts and company liabilities.  Because these liabilities apply to those incurred by every partner, it is often best for partners to adopt a partnership agreement to protect themselves. 

Before you form a business, it is important to speak with a business lawyer first. Every entity has complex implications and only an attorney can assess your situation and give you advice on which of these entities can meet your needs. 

Sebastian

Sebastian was born and raised in the busy city of Abbottabad. As a journalist, Saad Mushtaq has contributed to many online publications including the PAK Today and the Huffing Post. In regards to academics, Saad Mushtaq earned a degree in business from the Abbottabad UST, Havelian. Saad Mushtaq follows the money and covers all aspects of emerging tech here at The Hear Up.Thanks