what is the best business legal structure if your a small online starting business?
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what is the best business legal structure if your a small online starting business?
I am starting a small business that plans to mainly sale on the Amazon platform,
what would be the best legal structure to choose from? proprietorship,
partnership, limited liability company LLC, LLP, Corporation S, C ?
Asked on June 29, 2016 under Business Law, California
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 8 years ago | Contributor
Conventional wisdom, and my own opinion, is the LLC. (I've put my money where my mouth is: I've had several small business, all of which were LLCs).
First, you *definitely* want a corporation or LLC: both protect your personal assets (e.g. house; money in the bank) from the majority of business-related debts and obligations, including from being unable to repay loans (as long as you did not personally guaranty them) or from breaching contracts. The protection is not absolute, but you are vastly safer with a corporation or LLC than without.
A C-corp subjects you to double taxation: corporate profits are taxed first at the corporate level, than amounts paid or distributed to you, as the owner, are taxed as part of your income.
An S-corp avoids double taxation, as does an LLC where you elected "partnership" tax treatment: both are "pass through" entitites, so the profits "pass through" the business untaxed and are only taxed once, as part of your income. (And losses pass through, too, potentially reducing your personal tax burden.) Truthfully, there is little legally or financially to choose between with an S-corp and an LLC, and either will do the job; however, an LLC involves somewhat less paperwork, record keeping, and formalities than an S-corp, and so is an easier and more convenient choice.
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