When starting a business, one of the most important decisions you will make is what type of structure to choose for your business. The type of business you choose can have significant tax consequences. In addition, each type of business has benefits and drawbacks that could affect how your business flourishes and grows. It’s important to consult with an LLP formation attorney in Berks or Reading, PA to get advice about which type of business formation is right for your company.
Types of Business Formations
In Pennsylvania, there are five main types of business formations:
1) A Sole Proprietorship
In this type of business, you are the sole owner of the business and you retain maximum control as well as all the profits of the company. However, you also take on all risks and liability. Many small businesses start out as sole proprietorships, but you may wish to speak with a business attorney to find out whether this is the right structure for you.
2) A Limited Liability Corporation (LLC)
A limited liability corporation protects you from liability the same way a corporation can, but the tax consequences are different. Many entrepreneurs are attracted to the LLC structure because it offers flexibility and added protection. That makes it seem like a good mix between corporation and sole proprietorship structure, but it’s important to speak to an LLC formation attorney in Berks County or Reading, PA before you choose this option.
As an LLC formation attorney can explain, in some cases the tax liabilities with an LLC can be greater than the liabilities involved with a corporation. LLCs also can choose different profit distribution plans, and it’s important to get advice about how to distribute profits beneficially. An LLC formation attorney in Reading, PA, or your community can help you decide whether an LLC is right for you and can help you create an LLC if that’s what you decide to do.
3) A Corporation
A corporation makes the shareholders of a company distinct from the company itself, so it provides a high level of liability protection. With a corporation, your personal assets are protected and you may enjoy some tax benefits as well. However, you need to consult with a corporation startup attorney in Berks County or Reading, PA if you want your business to be established as a corporation.
While many large companies are corporations, it doesn’t mean it’s the right structure for you. A lawyer can help you decide. A corporation startup attorney in Reading, PA, is also important for compliance. If you don’t adhere to the rules of a corporation or set up your business correctly, you could lose the protections a corporation structure is supposed to offer.
4) A Partnership
In a partnership, two or more partners are liable for the business responsibilities and debts and are also entitled to profits. If you’re interested in forming a partnership, it’s important to consult with a partnership formation attorney in Berks County or your community.
One of the risks of a partnership is you’re responsible for the liabilities of your partners. A partnership formation attorney in Reading, PA or your community can help you find ways to minimize your risks and decide whether a partnership is right for your company. If you decide to set up your business as a partnership, a partnership formation attorney in Reading, PA, or your community can help you file the paperwork.
5) A Limited Liability Partnership (LLP)
In an LLP, there is generally a managing partner and one or more limited partners. Limited partners cannot manage the business and are not liable for the debts and legal responsibilities of a business. You’ll want to discuss the benefits and drawbacks of this structure with an LLP formation attorney in Berks County, Reading, PA or your city before proceeding.
Forming an LLP requires filing with the secretary of state. Since the limited partner can lose their protection with some types of work, it’s important to get legal advice from an LLP formation attorney in Reading, PA, or your community before trying to create this type of company.
Setting up a business is an exciting time, but you want legal counsel to ensure your excitement doesn’t obscure some of the legal questions concerning a new business. If you want to start your own organization, contact the Business Law Attorneys at The Miller Law Group for a consultation with our attorneys. Our goal is to set up your business for success.