I aspire to create a business that serves as a wellness vendor for corporations. The structure that ﬁts my business the best is a limited liability corporation (LLC). In the video “How to choose the Right Legal Structure for your Business” the viewer is urged to consider four main criteria when deciding upon a legal structure. The ﬁrst, and what I personally consider most important, is how much liability you desire to have. For example, if for some reason my company happens to go under, I do not wish to be held ﬁnancially liable for all of the debt, and so an LLC would be best because it is considered to be a different legal entity from myself, so I would be solely responsible just for what I invested.
Another key point posed by the video was how you want your earnings and proﬁts to be taxed.
An LLC has ﬂexibility when it comes to taxation, as you can later elect to be treated as a C-corp or Scam by ﬁling paperwork, such as a 2553 form.
With the IRS, but it is recommended to start as an LLC and then upgrade to a C-corp or S corp once enough savings have been generated. I would start out by being taxed the same as a sole proprietorship, so all my earnings would be taxed and I would pay a similar income tax rate on what my business makes as I would if I had earned that money from working at a company that was not my own.
One setback, according to the unit notes, would be that my taxes for Medicare and FICA are generally higher; however, due to the ﬂexibility, an LLC would be best for my business because I can ﬁrst be taxed the same as a sole proprietorship, but then once my company has enough savings I can choose to be taxed differently.
Additionally, the ease of set up for an LLC is not much of a hassle at all. Although you are required to file paperwork with the state to create an LLC, there are a variety of online legal resources to assist in the paperwork (the Video suggested Legal Zoom and Rocket Lawyer). When it comes to setting up an LLC, there are state ﬁling fees, but they should be less than 500 dollars. It may seem like much when initially starting off, but if the structure is best for your company, especially considering your legal responsibilities in an LLC versus a sole proprietorship or general partnership, the money is most deﬁnitely worth it. Equally important, one must consider the business structure’s ability to raise money and the ability to have partnerships. Partnerships in other agreements, such as a general partnership, can be risky due to the fact that a partner can leave and therefore cause the company to disband, as well as all partners being liable for the corporation.
In an LLC, you can choose to be a single member or have partners, and those involved are not liable as the company is a separate legal entity. If one partner decides to leave, the company can still operate without them. As long as you choose not to go public, there should be no issue when it comes to the ability to raise money (funding), unlike the difﬁculties one may face in a sole proprietorship or general partnership. When it comes to the type of business | wish to create, a LLC would be the best legal business structure to start off with. This is due to the fact that I desire to be treated as a separate legal entity from my business and that. Wish to currently be taxed as a sole proprietorship, but I have a ﬂeXibility of options of how I want to be taxed in the future. The general ease of set up of an LLC is a plus, I can also choose to have partners or be a single LLC, and I also like the LLC’s ability to raise money.