Even though choosing the right legal structure for your business is an important decision, it doesn’t have to be stressful. Like every other decision in your life, it’s based on your personal goals for your life and your future.
How large do you see your business becoming? Are you alright with being personally responsible for your business’s legal debts? Do you feel fine with having your income taxed twice? These are just some questions that can help you decide the best legal structure for your business. Regarding your business’s legal structure, here are some things you want to consider.
Personal Liability
Business is like a rollercoaster ride. You can generate much income in one week and then be hit with a lawsuit the next week. When you are hit with a lawsuit, would you feel confident knowing that your assets are up for grabs?
With certain business structures, you would be able to create your business as a separate entity. That means the business would be solely responsible for its debts, income, and lawsuits. Your assets would be protected.
Size of Your Business
You also want to consider the future growth of your business with your legal structure. If you and three of your friends own and operate the business, it may make sense to form a partnership. But what if you and your friends plan on turning your business into a franchise? In that case, it may make sense to form a corporation.
How Taxes Are Handled
Let’s be honest. No one gets excited when it comes to filing their taxes. But choosing the wrong business structure will make filing your taxes more difficult than it has to be. Even though you have the ability to change your legal structure, it can lead to several tax consequences in the future.
When choosing your legal structure, you want to know what types of taxes you will be responsible for and the possible deductions. You also want to find out how your legal structure can lead to different tax benefits for you.
If you don’t want to be taxed twice for the same income, you may not want to consider a corporation for your business structure. If you don’t enjoy filing different types of paperwork, you may want to consider a sole proprietorship or a partnership business structure.
Easy Transition
Whatever business structure you choose, you want to ensure that it caters to the potential growth of your business. One of the reasons why a sole proprietorship is the most reasonable business structure is that it is easy to form and transition from.
Some of the biggest corporations today, like Walmart and JCPenney, started as sole proprietorships. Whatever legal structure you choose, you want to ensure that the transition process to the next structure is stress-free.
Speak With a Phoenix Business Law Attorney Today
To keep your business running smoothly, speak with a Phoenix business law attorney at The Law Offices of William D. Black. Contact us online to schedule your free consultation.