Form Your Business With An Eye Toward The Future

There are many considerations when you are forming a business. One of the first, and one with long-reaching implications, is which type of entity you should choose. And if you have co-owners, your new business is an agreement with them—maybe one of the most important agreements you ever make—and getting that agreement expressed well in your company's organization documents is vital and almost certain to prevent future headaches.

Different Entities Have Different Advantages

There are several types of business entities, each with their own distinct advantages and disadvantages. They include:

  • Business corporations (C-corp). This is a classic business formation. Like a limited liability structure, it protects the owner from personal liability. However, the owner is generally taxed on both company income and on distributions, so the owner is taxed twice.
  • S-corporation (S-corp). This is not strictly a business entity, but is instead a way that a business may choose to be taxed. Choosing taxation as an S-corp can help some owners save money.
  • Limited liability company (LLC) or limited liability partnership (LLP). As their name would suggest, these entity types protect their owner from personal liability. They are generally taxed as a pass-through organization, meaning the owner is taxed only once, directly on their income rather than taxed twice as a C-corp, although they can also opt to be taxed as an S-corp.
  • Partnership and sole proprietorship. These are two very common types of formations because they are quite simple. However, it does not protect the owner or owners from personal liability.

Beyond just the type of entity, a founder of a business must decide matters regarding taxation, contracts to use and more. Whether your business is big or small, a startup or established company, these things can have a huge impact on how you run your business, so you must speak with an attorney to be sure you understand.

Speak With An Experienced Business Formation Attorney

Your situation is unique, and requires an individualized evaluation and plan for success. To receive one from one of the lawyers at Thompson Horst, PLLC, call our Edina office today at 612-584-2172. You can also reach us by sending an online message.