If you want sole or principal control of the company and its activities, the best option might be a sole proprietorship or an LLC. You can also negotiate such control in a partnership agreement. A corporation is built to have a board of directors that makes the main decisions that guide the company. To choose the perfect business structure for your company, evaluate all your options.
Do you like to do things alone? How about having full control over tasks? If so, a sole proprietorship may be the best option when choosing a business structure. With the transferred taxation, taxes pass through the company and fall on another entity, such as the sole proprietor. Basically, the company can avoid paying the tax directly, and revenues are only taxed once. If you like the idea of partnering with someone for your business venture, you can consider going the partnership route.
With a partnership, you own and operate the business with at least one other person. Like sole proprietorships, associations also enjoy transferred taxes. Companies also require extensive record-keeping and reporting requirements. Therefore, you must be willing to comply with more regulations and tax requirements.
In an S corporation, only the owners (also known as shareholders) of the company pay taxes. If you want to avoid double taxation but still want to own a corporation, consider operating as an S corporation. A limited liability company, or LLC, allows you to take advantage of a combination of different structures. It has sole proprietorship, corporation and association aspects.
As with anything, you should consider a few factors before choosing a structure for your startup. Before making any decision about the business structure, evaluate the pros and cons of each one, compare each entity and do your homework beforehand. After all, determining the structure of your business is an important decision. If you end up choosing a structure and you don't like it, you could change your structure in the future (p.
e.g. A type of business entity that is owned and operated by a person; there is no legal distinction between the owner and the company. Sole proprietorships are the most common form of legal structure for small businesses. A hybrid between a corporation, a general partnership and a sole proprietor.
The owners of an LLC are called members. Members may include individuals, corporations, other LLCs, and foreign entities. Most states allow a single-owner LLC, called a “single-member LLC.”. Do you want to know the other steps to start a business? See our blog post “11 Steps to Starting a Business in Tennessee or Alabama”.
For example, LLC owners should not use a personal checking account for business purposes and should always use the LLC's business name (instead of the owner's individual names) when working with clients. Like a partnership agreement or corporate statutes, the LLC operating agreement sets out rules for the ownership and operation of the company. The downside is that sole proprietors are not legally separated from their businesses, so they are responsible for all of their business obligations. A sole proprietorship is best suited for a business owned by an individual or couple that has no employees or significant contracts with owners, vendors, suppliers, or subcontractors.
One of the first decisions you'll need to make when starting a business is to determine the right legal structure for your company. However, an LLC is a better option for many companies because it offers limited liability in addition to management by a select group. Starting an online business requires the same diligence as starting a physical business, plus some unique steps. If you have a small business in Nashville or Davidson County, you may be eligible for a 2% interest loan with the Nashville Small Business Recovery Fund (NSBRF).
Personal checking accounts should not be used for business purposes and the corporate name should always be used when interacting with customers. However, like a sole proprietorship, a general partnership does not protect its partners from liability for business obligations. Unless you are a sole proprietorship or a general partnership, you will need to submit documentation to the state to establish the business entity of your choice. .
