“Choosing the Right Business Structure: LLC, S-Corp, or Partnership?”
Introduction
Starting a new business requires careful planning, especially when it comes to choosing the right legal structure. Each structure—LLC, S-Corp, and Partnership—offers different benefits and limitations. This guide will give you an overview to help you decide which fits your business goals best.
1. Limited Liability Company (LLC- Single or Multi-member)
LLCs are popular for their flexibility and liability protection. LLC owners (or members) aren’t personally responsible for company debts, meaning personal assets are protected if the business faces legal challenges. LLCs also offer flexibility in taxation, with options for pass-through taxation or corporate tax treatment.
2. S Corporation (S-Corp)
An S-Corp provides liability protection and allows income, losses, deductions, and credits to pass through to shareholders, who then report it on their personal tax returns. This structure avoids double taxation, making it fitting for particular businesses. However, there are limits on the number and type of shareholders allowed, and must have a Board of Directors.
3. Partnership
In partnerships, two or more people share ownership and responsibilities. General partnerships involve equal liability, while limited partnerships allow some partners to have limited liability and no active management role. Partnerships offer pass-through taxation, which can simplify tax filing but does not provide the same level of liability protection as LLCs or S-Corps.
Conclusion
Choosing the right structure for your business impacts taxes, liability, and growth potential. Consulting an attorney can help ensure you understand each option’s implications so you can make the best decision for your long-term goals.
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