Legal entity choices
What legal entity should I choose for my business?
One of the questions I am asked from entrepreneurs going in to business for the first time is what legal entity do I think they should use. My suggestion is that they simply open their business as a sole proprietor and once the business becomes established, then look to research and understand the different options and their costs so they create the right legal entity.
For some situations there is no choice but to move to a specific legal entity. For example, if two friends wish to create a business and they want it to be a partnership, then a legal entity that serves that need is required. In other cases, some professions require a legal entity, for example, an accountant, attorney and a medical practitioner. However, for a retailer, distributor, restaurateur or manufacturer it probably does not have that urgency and can wait. Most small business owners believe they need the legal protection of a separate legal entity to protect their personal assets but you can solve this problem with a good business insurance policy; which you will need for your business anyway.
When it is time to decide the best legal entity there are two main items to research and understand. The first is which legal entity provides the protection to operate your business. The best professional to have that discussion with is an attorney that specializes in business law. The second is what tax structure and planning goals do you want to achieve. The best professional to have that discussion with is a CPA or Enrolled Agent.
If you want help to create your legal entity, this can only be done by an attorney. You can go to the web and do it yourself with the online legal services but it’s important to get legal advice about your specific situation and I am not sure the amount of money to save is enough to justify using their services. There are many options to consider when putting together the right legal entity for your business. As we asked earlier, do you believe that an ounce of prevention is worth a pound of cure?
If you would like a two page summary of the different options available to you, click the following link: creating your legal entity.
If you’d like more information feel free to get in touch with me for a quick consultation. We’ll discuss your particular needs, what’s important to you and make a plan for those first few steps.