Business Formation
Business Formation
Choosing the right business entity is essential for setting your company up for success. Bruchman Law Firm can assist you in evaluating your long-term goals and priorities, as well as weighing your risks, when making this selection. The major business entity choices to consider are:
Sole Proprietor: This is the default option for many business owners who do not seek out legal advice or formally adopt a business structure. The owner bears full responsibility for all actions of the company and is personally liable in a lawsuit.
Limited Liability Company: An increasingly popular choice for its flexibility, an LLC is a hybrid entity that provides the owner(s) with liability protection, but allows the profits and losses to flow through to the owner(s). An LLC can have one or more owners and requires less corporate formalities than a corporation.
S Corporation: S corporations combine aspects of a partnership with a corporation. Owners enjoy liability protection, but generally face all tax burdens (or losses). There are also IRS imposed restrictions on how many classes of stock are issued and shareholders are limited to 100 or less and must be U.S. citizens or domestic trust or estates.
C Corporation: A traditional corporation allows for the maximum separation between the company and the owners. The IRS imposes a corporate tax on c-corporations and maintenance of the entity requires numerous corporate formalities, including regular shareholder and director meetings. A c-corporation is used frequently when outside investors are involved because it permits different classes of common and preferred stock.