Choosing the Right Entity for Your New Business In the haste to start a new business, it's common for people to forget how important it is to choose the right entity for it.Every business owner must engage in proper planning and consult with tax and legal professionals when selecting the appropriate entity because it has both tax and non-tax implications.
Every business owner ought to consider the following questions prior to placing an order for inventory, hiring
employees, or printing some fancy business cards:
1.How will the company be run?
2.What method will be used to transfer ownership rights?
3.Is it necessary for the ownership structure to remain adaptable?
4.When an owner passes away, retires, or declares bankruptcy, what happens?
5.What will be the owners' compensation?
6.What are the tax consequences for business owners who invest capital?
7.How much will owners be responsible for the company's debts and operations?
8.How are profits going to be taxed?
9.What kind of benefits will employees receive?
The limited liability company, or "LLC," is one type of entity that has gained significant popularity.An LLC can have as few as one "member" (owner) by submitting a Certificate of Organization to the Department of State.The following are some important characteristics of an LLC:
-entirely adaptable construction; Entity Formation
-can be taxed in the same way as a partnership -members of the LLC are not responsible for the LLC's debts and liabilities -requires fewer formalities than a corporation -members pay no annual fee -operating agreement controls members' relationships