Friday, March 27, 2015

Types Of Business Incorporations

Thinking about starting your own business at the Lake of the Ozarks? Congratulations - that's a big step! There are a lot of things to consider as you get your new startup off the ground. One thing to think about is the manner in which you want to form your business entity. There are a couple of different types of entities, and they each come with their own pros and cons. Here is a quick look at a few your options.

Sole Proprietorship

Sole proprietorships are possibly the simplest form of business corporation. Sole proprietorships have only one owner, and businesses will automatically be categorized as sole proprietorships until the owner selects otherwise.

PROS
  • Allows for easier taxes (only one tax return is required for business and personal)
  • Allows for lighter paperwork
  • As the sole owner, he/she is free to make all key decisions and adjust as quickly as desired
CONS
  • Owners are personally liable for all of the business debts and obligations
  • The business is entirely dependent on the sole proprietor (if he/she becomes ill or incapacitated, the business could be terminated)

C Corporation

C corporations (also called C corps) are the most common type of business incorporation, but they aren't always a top choice among small business owners. C corporations allow for multiple owners (also called shareholders). C corps may help to limit the amount of personal liability each shareholder has for the corporation's debts.

PROS
  • Allows for flexible profit-sharing among shareholders
  • Allows for an unlimited number of shareholders
  • Ownership can be easily transferred
  • Owners may not be personally liable for the corporation's business debts
  • Corporations will not automatically dissolve in the event of the owner's death
CONS
  • May be subject to increased taxation (the owner's salaries are taxed, and so are the business profits)
  • May require an increased amount of paperwork (corporations are required to host regular meetings and to keep detailed minutes of every minute)

Partnership

If more than one person owns the business but there are not enough people involved to go with a C corp, a partnership could be a good solution. In a partnership, both owners share equal profits and debts for the company. Partnerships begin as soon as two people start a business together, even if no formal paperwork is signed.

PROS
  • Easy to establish
  • Each partner is free to use his/her own unique strengths
  • Allows for great flexibility
CONS
  • Partners are personally liable for all of the business debts and obligations
  • Decisions may require the consent of both partners
  • Well over 50% of partnerships dissolve within their first year

Limited Liability Company

Limited liability Companies (LLCs) offer their own unique blend of corporations, sole proprietorships and partnerships. While they are not corporations, they do offer some of the liability protection that corporations do. Unlike sole proprietorships, LLCs allow for multiple owners.

PROS
  • Allows for an unlimited number of owners
  • Owners may not be personally liable for business debts and obligations
  • The business owners  are free to elect the management structure of the business
  • The company will not necessarily dissolve automatically  in the event of an owner's death
CONS
  • LLCs require less structure, which can cause potential pitfalls down the road if proper operating agreements are not in place
  • Many LLCs are taxed like many self-employment companies, which means the taxes may be higher
  • Owners may not have specific roles, which can cause confusion (especially when determining who has the authority to make the final say or to sign a contract)

Contact O'Donnell Law Center For Help Incorporating Your Business

If you're thinking about starting your own business at the Lake of the Ozarks, we encourage you to set up an appointment with our Camden County business attorney. We can walk you through the basics of setting up your own company and help you determine which incorporation method will best suit your needs. We look forward to working with you!

Call the most trusted law firm at the Lake of the Ozarks to get started today.

O'Donnell Law Center

We Carry Your Burden ~ You Carry On With Life.

Disclaimer: No attorney-client relationship is created by the publication of this blog.


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Phone: (573) 552-0317

O'Donnell Law Center, LLC
1026 Palisades Blvd. Suite 3
Osage Beach, MO  65065
(Located on the McDonald's Side of the Building)

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