Organizing your business protects your entire company. There are many reasons why you should organize your business, and these include tax purposes and protection against possible legal disputes. Another benefit of organizing your business is that it makes it easier for your business to obtain things such as insurance, bank accounts, and loans, as well as set up the payroll.
What Are your Organization Options?
There are several options when it comes to organizing your business. It is crucial that you understand how these organization options work so that you can choose which one fits your business model well. Below are the types of organization options that you can implement for your business
Sole Proprietorship: In this organization set up, the individual and the business are the same thus the business is not taxed separately from the individual. It is also easy to set up a sole proprietorship and the income can go directly into the owner’s pocket. The downside of this particular organization is that financing can be limited to the amount that the owner has or is capable of borrowing.
Partnership: This type of organization involves two or more owners. The agreement between partners is drafted by the lawyer and the earnings are distributed among the partners. This type of organization, however, involves certain exposure to legal risk such that when one partner wrongs a customer, the client can bring legal action to all partners.
Limited Liability Company: Also known as LLC, this type of organization provides legal protection for all its members. It can also choose how they are taxed: as a sole proprietor, partnership, C-Corp, or S-Corp. While there are tax benefits of an LLC, raising funds for expansion can be a bit more challenging.
C-Corporation: This type of organization setup is very common. It provides personal protection to the owners specifically that individual owners cannot be sued for something that the company did wrong. It is also easy to raise money if you have this kind of organization set up and you can share the compensation to your employees. The downside to this organization set up is that everything gets taxed from the profits to the dividends.
S-Corporation: This type of organization is more complex than a C-corporation. These are corporations that elect to pass corporate income, losses, and deductions through the shareholders.
How to Organize Your Business?
Whether you are a foreign businessman wanting to invest in the US or a homegrown entrepreneur, it is crucial to know how to organize your business. The first thing that you need to do is to decide which organization setup works for you. Different organization setups have different legal requirements. It is important to take note that the more complicated the organizational structure you adopt, the more legal requirements you need to prepare.
As such, you need help not only in establishing your business but on streamlining your organization setup. At MKS&H, we can help in establishing your business. Our commitment to quality, our service model–responsiveness and on-time delivery are minimum expectations.