Corporate Structure: Is Your Company Organized in the Best Way Possible?
Choosing a business entity or corporate structure is a big deal. It determines how your company will ultimately be organized. There are certain advantages to each type of business structure. Here are several common business structures that you may want to choose from.
One type of entity is a Limited Liability Corporation (LLC). Some advantages of this entity are that you can get some protection from potential lawsuits regarding your business. Also, you have the option to make your own brand name and business.
There are also some negative aspects about an LLC. For instance, there aren’t any tax breaks. Also, you may have to pay some sizable self-employment taxes, which can quickly add up.
Another way to organize your entity is through an S Corporation. This is particularly ideal for small business owners. As a business owner, you may qualify for significant tax breaks, which may make this type of structure advantageous. Also, you won’t be held responsible for any corporate debt. Finally, you won’t be subject to self-employment tax, which means your portion of the net income won’t be taxed.
A sole proprietorship is yet another way to organize your corporate structure. This is generally the easiest way to conduct your business. You won’t have to worry about unnecessary business registration. Ultimately, you get to choose what you would like to use or incorporate. For instance, if you don’t want a business bank account, then you don’t have to create one. Also, you won’t have to worry about doing any extra tax returns.
As with the other kind of corporate structures, there are some disadvantages. For instance, there is a hefty self-employment tax you may have to pay on your ordinary net income. Make sure you spend some time determining whether or not you will be able to deal with the tax rates.
One final type of corporate entity is a C Corporation. Fortune 500 companies tend to opt with this type of business structure. This type of business structure is geared more towards large companies and corporations. If you’re a small business owner, then you may want to opt with one of the other entities simply due to tax reasons.
As you can see, these are four of the main types of corporate structures. Each one of them is different and has unique advantages depending on the type or size of your company. It is important for you to thoroughly assess which one of the four will work the best for your company.