January 9, 2013 Leave a comment
January 2013 What legal business form is right for your business?
Every self employed individual must decide at some point as to a specific form of doing business. Over the next twelve months we will discuss the various business forms available under the law and what each form can or cannot do for an owner. Incidentally, the United States has a vibrant entrepreneurial landscape because business must operate under “the principle of law”. This concept of “principle of law” is not available in many economies around the globe.
For most new business owners the answer seems straight forward, “I will own my own business”. But that fails to tell the complete story. The business owner can select from many options for the legal form of business operation. Over the life of the business the owner may actually change the form of the business several times.
Many business owners are a for profit business. That is the more understood and desired category of doing business. The other category is not for profit. Many individuals believe these businesses, and they are a business, lose money hence the not for profit category. It is also assumed that a not for profit is a charity working to help others. While this is often the case, this is NOT what makes for a not for profit business. Being a for profit or not for profit is tied to the intent of the business owner.
Intent: make all the decisions; grow the business and sell at a profit; pass the business to heirs upon death; use the business to fund retirement; educate individuals in the basics of a topic; do research and develop policy. These are examples of intent for a business. Some of these “intents” only apply to a for profit business. Some of these intents qualify for tax benefits, some provide for a different array of benefits.
The person(s) starting a business must understand the tax impact of these intents to assure they are selecting the best form of business structure for their intent long term.
The next twelve months will look at the various legal forms available to a business, the tax implications of each and what additional considerations must be made when deciding on a business form. One blog will focus on not for profits and when that business form might be appropriate. The legal status of the business owner will be defined by the type of legal business form selected.
Do you have a question about how to choose your legal business form? Look first at what your intent is for the business long term……let’s talk.