The Basics for Your Corporate Business Structure
“Ideas are easy. Implementation is hard.” —Guy Kawasaki, Alltop co-founder
With your business idea scoped out, it’s time implement it. One of the most far-reaching decisions you’ll make is about corporate structure. Your corporate structure affects the taxes, paperwork, liability, and investment potential of your business.
Let’s examine five forms of corporate structure to identify the best option for you.
With this straightforward structure, it’s all you.
+ Taxes are simplified with expenses, self-employment tax, profits and losses part of your personal income tax filing.
– But you are responsible for company liabilities.
– And you may have to use funds from savings, personal loans, or home equity since banks may ascribe higher risk to you.
Your partnership may be ‘general’ with responsibility equally shared or ‘limited’ with a combination of owners and investors.
+ Your company is not taxed on income, instead passing profits or losses to partners.
– But partners assume responsibility for corporate debts.
– And you’ll pay for legal and accounting services to help with paperwork.
An independent legal enterprise, a corporation offers personal protection and flexibility when raising capital.
+ Personal assets are protected.
+ Shares of preferred or common stock can be sold to shareholders.
– But regulatory complexity increases, requiring you to pay for legal and accounting services.
– And both the corporation and individual shareholders are taxed on earnings.
Tax benefits and liability protection are advantages of an S corporate structure.
+ Income or loss is passed to shareholders and reported individually.
+/- With up to 100 shareholders, S corporations have access to capital, but can only sell common stock.
– And S corporations need legal and accounting services to address corporate complexity.
Limited Liability Company
This corporate structure is considered the best blend of partnerships and corporations.
+ Profit or losses reported on owner’s tax returns.
+ No limits on shareholders – raising capital becomes easier.
+ Full participation of members.
Whatever corporate structure you choose, our team at Growth Lending Group can help you with commercial financing solutions to meet your needs.