Business and Tax Lawyer Blog

With Florida unemployment rates at high levels, many displaced employees – executives as well as workers – are examining opportunities to start their own businesses. Deciding on the right structure for that business is an important step in starting the new business off on the right footing.

The proper structure – LLC, corporation, partnership or sole proprietorship – depends on what kind of products or services your business will provide, the owner's appetite for structure and their financial situation. Here are some factors to consider when choosing a business ownership structure:

Complexity – if you are starting your business without a lot of capital and will be essentially operating on a shoestring in the beginning, you may wish to choose a simple structure, like a sole proprietorship or partnership. Corporations and LLCs are more complex corporate structures and more expensive to maintain, requiring careful record keeping and certain operational formalities.

Risk – if you are operating an inherently risky business – for example, trading stock or involved in construction – you will probably want a structure that provides personal liability protection to shield your personal assets from the risk of business claims. A multi-member limited liability company (LLC) or corporation provides this kind of protection. The law in this area (especially with regard to the LLC structure) will be in a state of flux for a period of time due to a 2010 case as to a Florida LLC's ability to shield your business from personal claims. Likewise, a standard corporation will also provide protection from liability.

Taxes – taxes on business profits for partnerships, LLCs and sole proprietorships are all reported the same way: on the personal income tax returns of their owners, who must pay income taxes on all net profits. A corporation may file an S-Corp election to receive the same tax treatment; otherwise corporations pay corporate taxes at special rates on any profit at year's-end.

Raising Capital – a corporate structure allows you to sell shares in your business to raise investment capital. You also may raise capital through bank loans, SBA loans and other government loans as well as from entrepreneurial groups investing in your business.

If you are considering starting your own business and need information on your structure options, contact our Jacksonville, Florida business and tax law firm.