There are so many elements to consider and address when starting your business. One common question for many entrepreneurs is what type of entity they want their business to be classified as. A Minnesota business entity selection lawyer could help business owners plot the best structure for their objectives and bottom line. A seasoned corporate structure attorney could provide counsel and strategic guidance to help you get the most out of your enterprise.
Types of Entities
Choosing the right entity and structure for your business is critical to ensuring you have the protection and flexibility that you want. There are many options, each with strengths and drawbacks, that should be considered. Critically weighing the opportunities and threats of each model with a business structure selection attorney in Bloomington could help identify which entity is right for each specific business.
If you are going into business alone, a sole proprietorship is the default choice. It does not provide any liability protection and you file taxes individually, reporting the profits and losses of your business. Although a sole proprietorship is a bit bare-bones and does not have the same level of risk protection, it is extremely easy to form and maintain.
A partnership is an organization of two or more people working together to make a profit. Partnerships are also one of the entities that are easier to form. They are taxed individually and do not limit liability. However, unlike a sole proprietorship, there are legal mechanisms for handling partners leaving, entering, or other major alterations to how the business operates contained in a partnership agreement. This complex legal document is typically drafted by an attorney to ensure that nothing is left to chance and the business is taken care of.
C corporations (C Corp) are a popular choice of business entity as they offer limited liability for owners who are referred to as shareholders. Rather than the personal assets of shareholders being sacrificed to satisfy the corporation’s debts during default, the liability for shareholders is limited to their contribution to the corporation. However, one major drawback is that corporations are taxed twice. Once at the corporate level for profits and again when profits are distributed to shareholders as dividends. There are hundreds of aspects to consider when considering incorporation as a C Corp and even more varied ways that this structure could affect a business’s operation.
An S corporation is similar to a C corporation except in tax structure. Rather than being subject to corporate tax, profits, and losses “pass-through” the S corporation to shareholders who then report the information on their individual tax returns. An S corporation has more stringent requirements than a C corporation, typically having a limited amount of shareholders they are allowed to have.
Limited Liability Company
Limited liability companies (LLCs) are a great option for many owners as they provide the flexibility of a partnership while offering the liability protection of a corporation. An Operating Agreement usually sets out issues such as how profits and losses will be allocated, the management structure, and other important considerations. Profits and losses pass through the LLC to members like an S corporation, but without the limit on the number of members.
Learn How a Minnesota Business Entity Selection Lawyer Can Help
Whether you are starting your business from the ground up or want to reorganize your existing venture, a Bloomington business entity selection lawyer could help you will all aspects of this decision. From strategic advice on which type of entity will be best for your profitability to drafting formation documents and maintaining your business entity status, a Minnesota business entity selection could be the ally your company needs. Call today to schedule a consultation for your business.