While there are many decisions to make when launching your new business, choosing the right legal structure is among the most important ones. Depending on your needs and goals for your business, you may wonder which structure offers the best protection. Whether you decide to go with a sole proprietorship, partnership, or corporation, working with a trusted business law attorney will ensure that you set yourself and your company up for success. Let’s take a look at the three main types of legal structures to get you started.
Sole Proprietorship
A sole proprietorship is the simplest form of business structure, as it enables you to work alone as the owner and operator of the entity. There are certain advantages of sole proprietorship when it comes to taxes, but you also put yourself at increased risk of liability. In the event of legal action against your business, a sole proprietorship leaves you personally liable. It’s a good idea to talk through the potential benefits and disadvantages of this option with a trusted business lawyer to make sure you understand all the implications of establishing a sole proprietorship.
Partnerships and LLCs
If your business involves multiple individuals, you should consider forming a partnership or Limited Liability Company (LLC). Creating a general partnership is fairly straightforward, and the partners generally benefit from several tax advantages. However, like sole proprietors, partnerships involve personal liability, which can be risky. If you’re concerned about liability, forming an LLC may be a safer option. LLCs provide business owners with liability protection without the heavy tax burdens of corporations. There are more steps to starting an LLC, but you can always enlist the guidance of a knowledgeable business lawyer to help you complete the process.
Corporations
Corporate structures are the most complex business structures, as corporations operate as independent legal entities and must therefore comply with more significant restrictions and tax requirements. Corporations offer substantial liability protection to business owners, making this structure attractive to those hoping to minimize personal risk. However, owners must pay a double tax on the corporation’s earnings, so it’s essential to understand the implications of each business structure before arriving at your ultimate decision.
Reach out to Judex Law LLC today at (303) 523-4022 to discuss your business structure options with a knowledgeable Colorado business attorney.
