3 Things To Consider As You Choose A Legal Structure For Your Business
When starting a new business, there are a lot of things to think about and consider. But once you’ve decided that you have an idea that you’re ready to move forward with, one of the first things that you need to figure out is what kind of legal structure you want to have for your business.
The legal structure that you choose for your business can have a huge impact on many aspects of your company. So to make sure you pick the right one for your situation, here are three things to consider as you choose a legal structure for your business.
How Much Liability You’re Comfortable With
When you own a business, one of the things you have to think about is insurance and liability. With certain legal structures for your business, there are going to be differences in liability that might be more appealing to you.
With structures like a corporation or an LLC, there is going to be far less personal liability for you as an individual. This means that if someone seeks to sue you, they will be suing your company, not you as a person. But with something like a sole proprietorship, if you were to be sued, they would be suing both your business and you personally. So if you’re at all worried about personal liability, you should choose a legal structure that’s going to give you the protection you need.
How Big You Expect Your Business To Become
While it’s only the beginning of your new business, you should try to think into the future as you consider what legal structure will be best for you. However, to do so, you have to understand that different industries require different legal structures. For instance, a cannabis business (you can take a look at these guidelines if you’re just getting started) would not have the same legal structure as a firm that sells car parts. Hence, it would be necessary for you to seek the help of experts in this matter.
Moreover, keep in mind that the smaller your business is, the less complicated you’ll need your legal structure to be. So if you don’t plan on hiring other employees and aren’t trying to grow yourself into the next big thing, you likely won’t need a legal structure that covers these types of things. But if you’re hoping to really expand into the future, you should start out with a more complicated legal structure so that you don’t have to worry about making changes in the future.
How You’ll Be Taxed
One of the biggest implications for your legal structure has to do with taxes. Depending on what options you want for taxes, the legal structure you’ll want to choose will vary.
Because this can be complicated, it’s best to seek out the advice of a tax professional before you make this decision all on your own. They can help you understand all of the implications for each option and help you get set on the right path for now and the future.
If you’re about to start your own business and aren’t sure what legal structure to set up, consider using the tips mentioned above to help you.
