You are starting a company and want to limit your personal liability for the debts of the business as well as the taxes you'll have to pay. This is a common goal for many new business owners. Having a good understanding of how business legal structures work, however, is not so common. So, what are legal structures and what type(s) should you consider? C-corporations, S-corporations, limited liability companies, sole proprietorships, and partnerships are some of the more common options for business legal structures. There are differences and similarities in each that can dramatically affect the future of your company. Failing to structure your business in the most appropriate way (given your goals) can lead to many bad outcomes including:
- Higher than expected tax payments
- Large amounts of administrative work and costs
- Unexpected loss of your personal assets.
In this edition of HowStuffWorks, we will look at each option and help you make sense of the details so you can select the right structure.