The Different Types of Business Structure
There are several types of business structure, with the simplest being to operate as a sole proprietorship – with one owner – or a partnership with multiple owners. These business formats do not provide for limited liability, and when it comes to raising capital from the outside, the options are very limited. Other structures include:
- Limited Liability Company (LLC)
- Limited Liability Partnership (LLP)
- Subchapter Corporation (S Corporation)
- Conventional Corporation (C Corporation)
- Limited Partnership
Although setting up one of these business entities is not very difficult, and can even be done online, it is in your best interest to consult a business formation lawyer and an accountant for assistance. For each situation, it is wiser to choose certain types of businesses. A Seikaly, Stewart & Bennett Michigan business attorney, along with a CPA, can help you make these choices. Tax considerations can be controlling, and a CPA can advise you on which business structure best suits your preferences.
Some considerations you should make include:
- How income is dispensed to owners and employees
- The number of business owners and shareholders
- How much control you want each business owners to hold
- Whether your business requires real estate
- What kind of entity real estate is being leased from
- If you want to deduct medical insurance premiums for owners/employees
One of the big differences between various entities has to do with how losses can be taken in both the long and short term. The general rule is that bosses cannot be taken beyond the basis that the taxpayer has in the investment. But the way basis is computed can vary from one entity to another.
These are just a very few of the myriad considerations that go into selecting a business format. Setting up your own business online may seem simple, but unless you have a great deal of experience in these matters, you will not be privy to all the available options and considerations. It is not much different from sending someone who knows nothing about computers into a computer store to buy a system with no advice. He can walk out in 15 minutes with something, but he probably did not buy the piece of equipment that best suited his needs.
Call Seikaly, Stewart & Bennett for a No-Obligation Consultation
If you are establishing a business, the Michigan business attorneys at Seikaly, Stewart & Bennett can help you choose the right business entity. To schedule your no-obligation consultation, please call 248-785-0102 or fill out our contact form.