Who will control the business entity? “Control” of a business includes both broad decision-making rights and powers and day-to-day decision making authority. The type of business entity chosen for your business may define who has this control. “Control” also means control over the profits of the business. Who receives shares of the profits and how those profits are received vary from entity to entity. Additionally, control may be assigned or delegated by contracts or agreements, depending on the type of business entity.
Who is liable for business entity’s debts and other liabilities of the business?
A primary reason for creating a business entity is for the owner(s) or investor(s) to enjoy limited personal liability for the debts and liabilities of the company. However, the extent and structure of this protection varies between each type of entity.
How is the entity created and what is required to maintain the entity?
Depending on the type of business entity, you may or may not have to file documents with the Secretary of State to create and maintain your entity. Some entities, by-law, are required to maintain certain records in order for the entity to be recognized. Other entities operate under contracts rather the sometimes burdensome requirements of the law. Correctly creating an entity and maintaining all its requirements is essential for enjoying the benefits of a business entity.
How is the business entity taxed? A significant difference between types of business entities can be how they are taxed at the state and federal levels. Consideration should be given to taxes and what tax strategy works best for your business.
It is important that business owners consider all the pros and cons of each entity before choosing one through which to operate their business. Additional considerations, beyond those given above, may also factor into your decision. The attorneys at Alford & Burkhart will provide you with the information you need to make an informed choice and guide you towards the ideal business entity for your particular needs.