Business Lawyers Helping Tacoma Businesses Protect Interests and Assets
Many small businesses are not the result of years of management experience or time in an MBA program, but come from day-to-day experiences and inspiration that touches us at the most meaningful moments. While this often leads to ideas that revolutionize industry and change our lives, many new business owners lack guidance on how to best structure their companies to broaden their impact.
Choosing a business structure is a very important decision for any business owner. Business structures impact the control that an owner has over the company, the taxes they pay, the ability of the company to focus on social goods, and the risk of personal liability that the owner may face.
An experienced business attorney can help you evaluate your options in light of the very specific needs of your company. It is helpful to have an overview of the options available and the pros and cons of different business structures.
What’s The Best Option For Your Tacoma Business?
Business owners have several options when structuring their new endeavor:
- Sole Proprietorships
- Limited Partnerships
- Corporations and LLCs
- Social Purpose Corporations
Keeping it Simple but Risky
Sole proprietorships are the easiest of these organizational structures. There is no additional paperwork required to create a sole proprietorship and no need to register with the state or maintain certain traditions like a board of directors meeting. Business owners simply register and do business as a sole proprietor.
What this means is that the you and your business are one and the same. There is not a separate structure for your company and you do not need to pay separate business taxes. However, this also means that you are personally liable for any debts of your sole proprietorship, can be held responsible for any injuries or harm your business causes, and do not get any business tax benefits.
While sole proprietorships may be the easiest route for someone who sells items on Etsy or does occasional freelance work, you would not want to structure your construction company this way for fear of personal liability.
Partnerships are similar to a sole proprietorship, except with two people working together instead of one. Partnerships also do not require any particular paperwork or incorporation, and the taxes, revenue, and debts of the company are split between two people instead of with just one.
Like a sole proprietorship, in a partnership, both partners remain fully liable for the debts of the company or any lawsuit that may be filed against the company. For that reason, partnerships are not ideal for any type of small business that may have a risk of exposure.
Using Limited Liability To Protect Yourself
For any business owner who wants to work in an industry where accidents can happen, or for anyone willing to take a risk on a new idea that may ultimately fail, being fully responsible for the debts and liabilities of the company would be overwhelming and likely deter many individuals from even starting.
For this reason, the laws allow businesses to be structured as limited liability partnerships, corporations, and limited liability companies. Limited liability partnerships are much more complicated to structure than partnerships and may be hard to create without the assistance of an Washington small business attorney.
Much more common are corporations and limited liability companies. While they do take some filing of paperwork and setting up of structures, it is usually less complicated than a limited liability partnership, and worth it to a business owner.
The most unique aspect of corporations and LLCs is that they create an entirely separate business structure apart from the business owner. This business structure must file its own taxes, has its own business expenses and revenue, and has liability separate and apart from the business owner.
For the most part, owners of corporations and LLCs are protected from liability and claims from plaintiffs or creditors. Thus, this structure makes the most sense for those engaged in businesses where there is a higher risk for disputes, or individuals who have significant personal assets that they wouldn’t want put at risk by a new business venture.
Business Owners With Broader Goals In Mind
While any business owner can choose to focus their business on broader social goals such as reducing poverty or addressing climate change, there are certain corporate structures that facilitate these goals. The most common of these is the nonprofit corporation, while the lesser known option is a Social Purpose corporation.
Nonprofits are formed, as the name suggests, not to make a profit for a business owner, but to achieve a charitable purpose. Money received through donations or the work that the nonprofit does are put back into the organization to help it achieve its goals. In exchange, nonprofits are exempt from taxes on the money that they receive or earn over the year.
By contrast, Social Purpose corporations allow companies to make and keep their profits, but also permit them to focus on important social goals. Most business structures create a duty to shareholders and investors to maximize profits. Social Purpose corporations allow employees and officers to balance profit creation with other commitments to greater social goods, which makes them an increasingly popular option.
Overwhelmed By Your Choices? Contact An Experienced Washington Attorney
There is no doubt that business owners face an incredible number of choices when setting up their business, and the sheer number of options for a business structure can quickly become overwhelming. If you’re uncertain where to start or what to prioritize in choosing the type of business entity that you want to use, legal assistance is available for you.
The business attorneys at Bolan Law Group., have years of experience helping small business owners from a wide variety of different backgrounds. We can help you to choose the business structure that best achieves your short and long term goals, and protect your assets and families from potential liability. To talk with a knowledgeable lawyer about your options, contact us online or at (253) 470-2356.