Determining The Right Structure For Your Business Needs
Choosing the right entity for your business needs can help you minimize taxes, protect your personal property and meet your long-term goals. Located in Golden, the experienced attorneys at Bradley Devitt Haas & Watkins, P.C., can advise you on the business entity type that will suit your needs.
Dictating Taxation And Liability
From business formation to dissolution, the choice of a business structure dictates how a business functions and performs. If considering purchasing assets of a business, you should consider forming one of these types of entities. Common structures for businesses in Colorado include:
- Sole proprietorship: An unincorporated business owned by a single person. Simple to start, owners do not need a Tax ID number or business bank account, although both are recommended. You report your small business income and expenses on your personal tax return. Owners are personally responsible for any business liabilities, making sole proprietorship inadvisable for high-risk ventures.
- Partnership: An unincorporated business owned by two or more people. The business owners divide the profits and report the income on their personal tax returns. All partners are liable for their individual share of the partnership’s debts, but each partner is liable for all business debts incurred by other partners.
- S corporation: An incorporated structure that offers asset protection to shareholders. S corporations can only offer one class of stock and can have no more than 100 shareholders. Shareholders pay taxes on their share of the profits and business income is not subject to corporate tax.
- C corporation: An incorporated formal entity. C corporations can have multiple classes of stock and are not subject to a maximum number of shareholders. A C corporation pays taxes on business profits and shareholders pay taxes again on their portion of the earnings. C corporation shareholders have limited liability for any business debts.
- Limited liability company: A hybrid entity that protects the personal assets of the business owners, which is advantageous for the members. LLC structuring has greater tax flexibility, allowing profits to be taxed at the personal or member level.
Let Us Offer You Advice
Planning your business appropriately from the beginning gives you greater control if circumstances change later. The right business structure can prevent disputes and allow for straightforward transfer of ownership. If you have more questions about choosing the right business formation or other business law topics, please call 303-552-2615 to speak with a lawyer or complete our online contact form.