After designing and drafting your business plan, it’s time to choose the best business structure to meet your needs. There are four main business structures, including sole proprietorship, partnership, limited liability company (LLC), and corporations.
A sole proprietorship is a single entrepreneur who chooses to go into business for themselves. A pro to this business structure is the ease of set up and very low upfront costs compared to other business structures. However, if this sounds too good to be true, it’s because it is. The owner has what's known as unlimited liability and is personally accountable for all debts and actions of the business. The owner’s personal assets are not protected if the business is sued. This type of business structure is subject to higher tax burdens compared to other business structures and the owner has to pay self-employment tax on all business profits.
General Partnerships are two or more people running a business together similar to a sole proprietorship. There is no filing and the partnership has unlimited liability. Profits and losses are passed through to each of the partners’ personal tax returns. This income is predisposed to self-employment tax and may carry a higher tax burden compared to other business structures.
A corporation is a legal business structure that is independent of the individual. Although they are more time consuming, complicated, and expensive compared to sole proprietorships, they carry their weight in gold in terms of protecting the owner's personal assets if the corporation were to be sued.
A corporation can elect to be taxed as an S corp or a C corp, each with their respective pros and cons. The earnings of the owners will be derived from either dividends or a salary and therefore there is no self-employment tax. There are numerous and detailed steps in order to form and maintain a corporation. Attorney Raphael has the education, experience, and know-how to guide you through these steps and solve any potential issues that may arise. He will take care of your legal issues so you can stay focused on making your business thrive.
Limited Liability Company (LLC)
The Limited Liability Company is a well known and highly favored business structure among many successful entrepreneurs. It features tax flexibility and ease of maintenance. It allows liability safeguards of a corporation while maintaining ease of operation similar to a sole proprietorship.
The limited liability company does not have numerous responsibilities of a corporation such as taking minutes, shareholder meetings, and board of director meetings.
Income can be taxed as a pass-through entity as a corporation, a partnership, or a sole proprietor. In order to form an LLC in Massachusetts, the Certificate of Organization needs to be filed with the secretary of state. I can guide you step by step through the process and make the experience easy and exciting as you get ready to make your business official.