VanAntwerp Attorneys, LLP
Phone: 606-618-0698

3 Things To Think About When Choosing A Business Entity

Starting a business is an exciting time for any entrepreneur. When you have spent a substantial amount of time and energy working on turning your passion into a business, seeing it come to life can be a real joy.

As you work toward the realization of your project, however, it is important to protect your hard work by thinking carefully about which entity makes the most sense for your business. In doing so, there are several things to consider.

How much liability protection do you need?

The business structure you choose can impact how protected you are from liability related to your business. For example, the sole proprietor structure is very easy to set up, but does not offer liability protection. This means that you - the owner - will be held personally responsible for any liabilities related to the business.

With a limited liability company structure, however, partners are usually protected from business-related liabilities.

Choosing the right one for your business means considering what kind of exposure to liabilities you are likely to have and how protected you would like to be from any personal responsibility.

What kind of tax burden are you willing to deal with?

Different business structures are taxed differently. Tax reporting is simpler under a sole proprietorship because your business is not taxed separately. Under a limited liability company, on the other hand, you will have to report your taxes as if you were self-employed. With a corporation, your business taxes will be filed separately from your personal taxes.

In Kentucky, certain types of entities will be subject to a limited liability entity tax, a corporate tax or both, depending on which one you choose. Some entities are also exempt from having to file separate federal taxes.

How much control do you want?

Having complete control over your business can be a good thing - but there are times when it can be a burden as well. Having complete control - as you do with a sole proprietorship - means not only can you make all of the decisions about your business, but you are also fully responsible for anything that goes wrong. Other entities offer less control, but also a lighter burden.

Making the right choice

Now that you know what you should be thinking about when choosing a business structure, it is time to make a decision. One way to ensure that you are choosing the right option for your operation is to talk to an experienced business formation lawyer. Even if you already have an idea of which entity is best for you, having an attorney confirm your choice can give you the peace of mind you need to move forward confidently.

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