Monday, July 13, 2020

Decisions when choosing a business type




Debt and Liability
Most of the small businesses and startups accept the personal liability associated with a sole proprietorship or partnership as a significant risk of doing business. If you're in a high-risk industry, such as selling CBD or firearms online, or simply want to keep your business and personal circumstances private, you can limit personal liability by filing for a more formal company structure. The downside is that this commonly takes more paperwork, costs more to register, and may have greater reporting or maintenance demands than simpler business models.

Filing taxes
You have two choices when it gets to filing your business taxes. You can record business profits/expenses on your tax returns, or you can hold your business file taxes separately as its entity. Most of the small business owners prefer the simplicity of filing taxes on their returns, but filing business taxes separately can help you keep your private and company finances separate.

Partners or Investors
If you're starting your business with a partner or private investor, you won't be able to create a sole proprietorship. You can pick between a partnership, a limited partnership, or an LLC.

Hiring employees
Some of the easiest business types like sole proprietorships can make it hard to hire workers down the road. While it's likely to change your business type to grow with your company, if you already have workers or plan to hire them, it may be better to future-proof by a more formal business structure like an LLC or corporation.

Are you beginning your company for-profit or non-profit cause? If you're just concerned with helping others and aren't going for profit, establishing a nonprofit can grant you tax-exempt status—although there's a lot of paperwork needed.

Will your business be held and operated democratically by its members with no particular owner? Known as a "Co-op", this type of company is very rare.

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