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What’s the Best Structure for Your Business?
Going to start your own company and looking for the best business structure for your business? Choosing the best legal structure for your business depends on which is best for you and the type of business. There are various types of business structures like the Nevada LLC and each of them has its advantages and disadvantages.
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Your choice will determine how you want to run your business. It will determine everything from control to taxes and liability. The best way of choosing a business structure is to see which one which has the most advantages for you and the type of business you want to incorporate. Even though most of the people tend to choose a Nevada LLC, it is better to first understand all about the various structure before making a decision.
Using your organizational and personal goals, you can choose the one that suits you the most. The types of business structures are:
Sole Proprietorship
This is the least considered option out of all, yet the simplest. Out of all, this structure is the most unpreferred after the Nevada LLC structure because of a good reason, they give you no legal protection. being in a sole proprietor has its advantages and disadvantages, if you like to work alone and can handle the risk then this type of business structure is for you.
In this structure, you are in control of the whole business alone. Along with full control over the company you get zero protection against your personal belongings. What does it mean? Well, it means that if someone sues your business for any reason, the person will be able to sue you to an amount worth more than your company’s net worth. The additional amount over the business net worth will be acquired from your personal account, which is not this way if you decide to open a Nevada LLC.
If you are not able to pay the entire money they even can take away your personal assets such as cars, house, etc. You are entirely liable for everything as you are the sole owner of the business. You are even required to pay quarterly taxes under this structure. It is a suitable structure for small businesses as the requirements for it is low, but still is risky. The Legal requirements of this structure are low compared to the others.
Limited Liability Companies (LLC)
The most popular structure is the Limited Liability Company (LLC). LLC is a much safer version of sole proprietorship, their structures are similar to each other, but in an LLC, all the profit and losses have to be filed on the individual’s tax return.
Unlike a sole proprietorship, an LLC is hybrid. The structure allows the owner or partners to limit their personal liability, at the same time enjoying the flexibility and tax advantages of the partnership. In an LLC the owner’s personal assets are safe as long as they are proven un-included in any illegal activity while carrying out the business activities, and have not acted in any unethical/irresponsible manner.
With the safe possession of your personal assets conducting business activities will be easier for men, so if you choose an LLC unlike the example that was given above you won’t lose any personal assets. This type of business structure is the most considered type for new business entrepreneurs.
This structure could be the best for you if you are trying to open your business alone. If you are thinking of bringing in shareholders, you may bring in how many you want, and they will just be listed as the owners alongside your name. You are also in control of the day to day business activities. Open a Nevada LLC with the help of the professionals at IncParadise.
Partnerships
If you are planning to open a company with one other individual, then you can form a partnership. There are different types of partnerships, and the most common ones are a general partnership and a limited partnership (which is different from a Nevada LLC).
A general partnership has properties of sole proprietorship such as the partners are entirely liable for everything. In a limited partnership, one person or more have responsibilities of the general operations, and the limited partners just are investors who do not have control over the company.
A limited partnership has a lot of legal paperwork to be done and sometimes can become overwhelming, that is why usually businessmen do not choose this structure. It is much more easier to form a general partnership comparatively.
A general partnership has its downsides as you have no protection against your personal assets. It also has its good sides as since both partners are active in the daily operations of the company they can put their experiences and brains together and make the company excel faster.
If you want to open a general partnership, then choose someone who you trust because if one gets stuck, then the other will also be trapped. For instance, if out of two partners one decides to take a loan for the business and does so if he is not able to return the money then the bank or the authority will hold the company and its owners. This will cause him to also lose what he has because of one’s mistake. This is also one of the reasons why many choose to open a Nevada LLC instead.
Corporations
This is the last type of structure for you to consider. Corporations include C corporations and S corporations. The both of them are corporations, but they each have their own differences and characteristics.
S Corporations
It is similar to LLC as they are considered a pass-through entity. In this type of structure, the owner is taxed and not the business. If the owner wishes he may take in 100 shareholders in the S corporation, but only can issue one type of stock. The owner’s assets are secure and are not liable in the business.
One major downside of the corporation is that the owners must designate directors and all the significant decisions must be voted by the shareholders, this may cause delays in a situation when quick response is needed and might slow the speed of the working and growth of the company.
While it has similarities to the Nevada LLC, choosing this will disable the owner’s capability to control the company with his decisions.
C Corporations
C corporations are usually used by big companies, and not small businesses as the taxation are double and are not suitable for small companies. Large companies use this structure because of their complex structure and higher regulations with tax requirements. Regardless, S corporation alike C corporation gives protection of personal assets to the owner by limiting their liability.
You can raise capital from common stock and preferred stocks while using C corporation. The downfalls of it is that it is the most expensive structure out of the rest, but the money goes to good use by keeping the business functioning. As said before, it is expensive to start a business which is advised to keep an accountant and an attorney for all the legal issues involved.
In this structure, unlike the Nevada LLC, taxes are complicated as they are charged to the shareholders in their personal income taxes and the taxes are on the profits they make. These taxes are basically federal and state taxes of the company that the shareholders have to give.
Factors to Consider while Selecting the Business Structure
- Flexibility: Choose the structure that gives you the freedom of flexibility as much as you desire. The Nevada LLC offers you this feature and many others.
- Complexity: You have to choose the complexity level of your business and while doing so ask yourself where is your company headed to and what are the goals.
- Liability: When you are starting your company you have to consider all the facts from personal to business as the structure you choose might hold your personal assets liable.
- Taxes: Taxes are one of the significant parts of a business and your ability to pay them during the functioning of the business. You have to see which one suits the type of company you want to open.
- Control: How much do you desire to control the business? Whether you want less power or more control over the company, all factors considered you should choose the one that suits your and will go a long way with you.
- Capital investment: Another thing to check is how much are you willing or able to invest in the business. This initial investment will help boost the companies start. The best choice for this is Nevada LLC that helps you benefit from this feature at the fullest.
- License, permits, and regulations: While choosing the structure of your company you have to crosscheck all the requirements that will be needed for the startup of the company. From license to all permits to the production of that product, everything.
Conclusion
Basically, to choose a structure for your business, you have to consider all the factors, from what type of business to the ability to pay taxes on it. To decide you have to see which one is most advantageous to you and your business, and then you go ahead.
Opening a company may be a tiring process, but if done successfully with a good idea the returns are worth the struggle. LLC is one of the best structures for small businesses as it gives you the advantage to start in the market with safety. If you want to start a Nevada LLC, then just contact us!