If you’re looking to start a business, then you’ve probably got a lot of things on your mind. You might be contemplating where to acquire physical space, which kind of talent you want to secure for key positions, and even what type of marketing strategy you think will best promote your business. Yet, before you get to all of these considerations you’ll need to choose the business structure that is right for you. It might seem like a small step, but your business structure can have profound ramifications for how your business operates and how much you put yourself at risk.
The basics of a partnership
This week, we’ll briefly look at partnerships. This business type involves two or more individuals who agree to manage a business while also sharing in its profits and losses. In a general partnership, all partners share the profits and losses equally, and they are personally liable for the partnership’s debt. This means that if a judgment is entered against the partnership and there aren’t enough business assets to pay it off, then collectors can seek out your personal assets to pay off that judgment.
But general partnerships aren’t your only option here. Limited liability partnerships tend to be more popular amongst many entrepreneurs, primarily because partners are shielded from the liabilities of other partners. This provides them with a significant amount of protection while still ensuring that they get to share in the business’s profits.
One of the biggest advantages of a partnership is that the income generated by the partnership is not taxed. Instead, the individual partner’s are taxed on their earnings from the business. This differs from a corporation where income is essentially taxed twice: once at the corporate level and once at the personal level.
You have to know where to start before you know where you’re going
Starting a business can be really exciting. Most people who do so have big plans for the future and are often eager to get up an running. But if you’re in this position you might want to slow down for just a second to make sure that you have a solid business structure and business plan. An attorney who is experienced with business formation and planning can help you navigate this piece of your business so that you can focus on bringing your dreams of the future into reality.