Better business structures

It is good to get advice from a lawyer and an accountant sooner rather than later, if you are establishing a business. An accountant can give important advice about your taxes. You might discuss with them whether a limited partnership (LP), a limited liability company (LLC), or a corporation might be best.

Limited Partnership

A limited partnership has two types of partners, general partners and limited partners. The general partners are responsible for managing the organization, and can make obligations on behalf of the partnership. General partners are also liable for the partnerships actions and obligations. Limited partners are liable to the extent of the money that they put into the organization, provided that they are not actively involved in the affairs of the partnership. To avoid liability problems, the limited partnership can have a corporation or LLC as general partners. Forming a limited partnership that provides good liability protection is more complicated than forming either an LLC or a corporation. The LLC tends to be favored in the real estate business and is not allowed for certain organizations, such as banks.

Corporations

Incorporating is attractive. There are two types of corporations, C or S corporations. The individuals in a C corporation are taxed on their own income and the corporation is taxed resulting in double taxation. For S corporations, there is a pass through tax. The tax passes through to the owners resulting in single taxation. The profits and losses of the S corporation would be paid on your personal income tax. Unlike sole proprietorships or partnerships, the LLC, C corporations, and S corporations have good liability protection. But you have to carefully follow the regulations, including annual meetings and careful separation of your personal finances to avoid losing your liability protection. For more information to help you decide about the best business structure for you, there is excellent information at the Internal Revenue Service website, and the US Small Business Administration site, too.