• 3755 Washington Blvd Ste 4 So. Ogden, UT 84401

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Veronica Castillo

New Business Formation

The type of legal business structure you choose will depend on several factors and influence things like Liability, Taxation, Payroll, and Record Keeping. The key is to find the best fit for your organization’s current and future goals. It can prove difficult to move backwards in the event that you need to change your business structure once you’ve registered your organization, so be sure to give it some serious thought.

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Types of business structures

  • Sole Proprietorship
  • Limited Liability Company (LLC)
  • S Corporation
  • C Corporation
  • Partnerships
  • Non-Profit

Benefits and Limitations

A one-person business owner.
Benefits
  • The easiest and cheapest to form and            report
  • Profits are taxed through your income
  • You are your own boss and you make all        the decisions
  • Owner flexibility
    • Limitations
  • If something happens to you, the                    business dies
  • You do everything, unless you                          outsource  specific functions
  • You have unlimited personal liability.            You COULD lose all of your personal                assets

    • A business structure allowed by state statute that offers owners limited personal liability for the debts and actions of the company.
    Benefits
  • You are taxed like a sole proprietor
  • You have more owner management               flexibility
  • You have Limited Personal Liability
    • Limitations
  • Not all states currently allow it
  • Owners cannot have a salary

    • Is a closely held corporation by the Internal Revenue Code of the United States federal income tax, where in the corporation is not taxed but the income or losses are distributed to the shareholders who are taxed personally
    Benefits
  • You operate like a C-Corp but get the tax       benefit of sole partnership
  • You have limited personal liability
  • Owners can have a salary
    • Limitations
  • You have to qualify to be an S-Corp
  • You can have no more that 100                        shareholders
  • Like a corporation, you have less owner        flexibility

    • A corporation that, under US income tax law, is taxed separately from its owners
    Benefits
  • The best part you have limited personal        liability
  • Can be easier to attract funding
  • Transfer of Ownership if an owner                  leaves, the business lives on
    • Limitations
  • You are double taxed
  • Less owner flexibility than a partnership       or sole proprietor

    • Two or more people forming a business. In the more advanced view you will see that there are two types of partners, general and limited and you should know what the difference is.
    Benefit
  • You are taxed through your income
  • Owner flexibility
  • You can share the workload and risk
  • Bringing a partner can complement your      skill set where you might fall short
    • Limitations
  • The General Partner has unlimited                 personal liability
  • When something happens to one of the       partners, the company may go out of           business
  • Can be difficult to attract funding

    • If your business goal is more focused on impact than on profit, this might be the right structure for you
    Benefits
  • When filed and approved as a 501(c)(3),          you are considered tax exempt,                    meaning all donations to the                            organization by individuals are                        tax deductible
  • Are typically protected from legal liability
    • Limitations
  • Compared to other types of entities,               nonprofits can be more costly and                 time-consuming to launch
  • Reporting requirements for                            non- profits are much tougher than               those of other business structures, and        due to the nature of the organization             are generally under more scrutiny.

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