17 Sep 2018

What You Need to Consider When Selecting a Business Entity

Employees working and helping each other

Various business entities work differently. As such, some categories of business structures tend to be highly flexible, while others are completely unsuitable for particular scenarios. Just like people, businesses are unique. They are set up with different goals, interest and motivations.

Thus, how you form your entity and how you document your interests and goals are important. Here are various considerations recommended by Denver real estate attorneys to ensure that you make the right decision.

Protection Against Liability

Lack of liability protection in a business or a company makes the owner directly liable for all the debts of the business. This puts anything — from a family home to your personal bank account — at risk, in case your company gets in any form of trouble.

There are two ways through which you can protect yourself from liability. First, is through setting up a legal business entity. The second is through obtaining an insurance cover. However, the latter might not entirely protect you as it comes with policy limits.

Minimizing Tax Exposure

No business person wants to pay more taxes than what’s required. However, if you lack a corporate legal structure, you may have limited tax flexibility. As such, before selecting your business structure, you need to understand its effects on your corporate income taxes as well as personal income taxes.

Legal compliance Burden

By selecting a particular business entity, you automatically commit to doing the necessary to sustain the legal position of your business. Therefore, you need to understand the total compliance cost of the business entity that you choose.

For instance, some entities are required to have annual meetings, come up with particular documents in these meetings and file particular taxes within the entity.

Popular types of business entities include partnerships, sole proprietorship, corporations, and Limited Liability Company. Each entity has a unique purpose and legal requirements. This makes it necessary to consult an attorney to help you settle on the business structure that makes the most sense for your situation.

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