Where to Start: Inc. or LLC?
There exist several types of business entities, including Limited Liability Companies ("LLCs"), C Corporations, S Corporations, Partnerships and Sole Proprietorships. Which one is right for your needs depends on both personal and business goals.
S and C Corporations
Taxation is perhaps the most important reason to choose an S Corp or a C Corp carefully.
With an S Corporation, taxes "pass through" the business and no taxes are paid at the corporate level. Instead, all profit or loss is assigned to the owner of the business, and taxes are then paid on an individual level.
C Corporations, on the other hand, do pay taxes at the corporate level. As such, double taxation may occur, as income is taxed once as the corporation earns it, then again as the business owners are paid.
When LLC's Make Sense
Limited Liability Companies, LLC's, make sense, among other times, when business owners are looking to shield their personal assets from business-related debts, although they do not offer perfect protection.
For example, if a slip and fall were to occur on a property owned by an LLC, and the victim awarded a massive amount of money in a lawsuit, the assets of the owners of the LLC could not be forcibly used to pay the judgement. This is true in Florida and in all states: uniform LLC laws have been adopted nationwide, limiting how creditors can seek redress against LLC owners.
Protecting Individual Assets
Not all business entities shield their owners from business-related debts, and none do perfectly. The following business entities, for example, offer no protection, or even distinction between, business and personal assets:
- Sole proprietorships
- General partnerships
A business lawyer can help a new business owner choose the correct corporate entity for their needs.
Schedule an Appointment with our Firm
For help with setting up a business or choosing the right business entity, click below to schedule a meeting. We keep all info strictly confidential, and we answer all inquiries in a timely manner.
Do I Need an Attorney to Start a Business?
One can form a business online without any assistance from a lawyer.
But informed business owners understand that choosing a business entity that is incorrect for the needs of the business, or its owners, can have costly consequences in the future.
For example, if a new business owner, who formed a sole proprietorship, believed he or she were personally shielded from any debt in the event the business went south, they would be mistaken. Instead, the business owner would be just as liable for all the debts as if no business had been formed in the first place. Sole proprietorships do not distinguish between the individual and the business, as far as debt is concerned.
What to Expect when Hiring a Business Lawyer
Business lawyers act as advisors when their clients wish to form a new business. Once an attorney learns about the goals of the new business endeavor, and finds out what is most important to the client on a personal level, a professional recommendation is made, and the appropriate paperwork is prepared.
When attending a meeting regarding setting up your new business, you can expect to spend about an hour. This time allows the attorney to get to know you and your business needs, and steer you in the right direction.