Opting for the Best Business Structures is the Key to Performance

The reason behind setting up a corporation is for the protection of your assets and to protect yourself from liability. If you are planning to run a business that gives advice, publishes articles that others have written or manufacture a product you will want to consider incorporating your business.

There are a number of advantages to incorporating, among them is your ability to sell stock in the business to raise capital, you can transfer the ownership of the business quickly, and you are now able to set up retirement plans. These are some important aspects to a business owner, but are they the right ones for your business.

* The negative part of incorporating your business is you will have to put down money to set it up.

* You will also have to keep perfect records of meetings with the shareholders and file a separate income tax return.

* Being taxed twice on your businesses profits is another concern for starting a corporation. You are always able to start your business off as a sole proprietorship and change it later as your business grows and acquires different needs.

Take a look at some of the differences between types of corporations and choose which one is right for you.

• With a sole proprietorship there is no cost to start it.

You do not have to fill out any confusing legal forms and you will not have to bend over backward to satisfy the government. You are in charge of when you open the business and when you close it. It is more difficult to raise capital and transfer the ownership of the business.

On the other hand, there are some very positive aspects of this type of business. This is especially true of a start up business. It is always possible to change your business structure later. Remember nothing is set in stone.

• An LLC is a way to set up a corporation that is considerably less costly and formal. You will still get the protection from liability with an LLC.

The profits and losses are filed on the individual members personal tax return. There isn’t a need for a separate business tax return. Those are the aspects that make this a very attractive option for small businesses. The costs associated for starting a small business can be huge, but one way of reducing the costs is with this type of structure.

• The most common type of small business corporation is an S corporation.

This type of business protects the shareholders from any debts that are incurred by the business. The board of directors that are elected by the shareholders manages it. The advantage of this type of business is that the profits go to the shareholders directly and you are not taxed twice as dividends and then again as income.

• A C corporation is very similar to an S corp. except that it is taxable.

This is usually the choice of larger corporations. These companies have thousands of shareholders and are usually publicly traded companies. If a business owner plans to give himself or herself a low salary and reinvest the profits back into the company this might be a very attractive option.

You can potentially spend a few hundred or a few thousand dollars to set up your business. It is highly recommended that you seek the advice of a lawyer before you attempt to do this on your own. There are some sites online that will aid the entrepreneur in setting up their business. The cost to do this online can be considerably less than using the services of an attorney.

However, you will have to weigh the costs of hiring an attorney with the potential for making a mistake and what that mistake could cost in the long run. Many new business owners opt for hiring an attorney just for the peace of mind that everything was handled correctly and will not cause future problems.

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