What business structure should I use for the business Im starting?
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What business structure should I use for the business Im starting?
Hello, Im in the planning phase of starting a local
drum shop. What business structure makes the most
sense for this specialized retail venture and why?
Asked on April 4, 2018 under Business Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 6 years ago | Contributor
Limited liability company or LLC.
1) You want a structure that protects you from business-related debts (e.g. if the business borrows money and can't repay) and legal liability (e.g. if it violates a contract or lease and is sued): that means an LLC or corporation.
2) You want to avoid double taxation, in the form of having any profits first taxed at the corporate level, then taxed again as part of your income when you take money out of the business. That means no "C-corp." (which is the type of corporation used for big companies, like telecoms and car companies) and instead points you to "S-corps" and LLC, which are "pass through" or "disregarded" entities: any profits "pass through" the entity and are only taxed once, with owner's income.
3) An S-corp. and an LLC are very similar in effect, but an LLC involves somewhat less paperwork and record-keeping, giving it an advantage for a small business owner.
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