There are a lot of decisions that you have to make before you start your business, and each of them can have long-term implications for your profits, your potential liability, and your business operations. This is especially true when it comes to choosing a business structure. You have many options in this regard, and you should consider each of them thoroughly to ensure that you’re choosing the business structure that is best for you.
Is a partnership right for you?
One commonly utilized business structure is the partnership. In its most basic terms, a partnership is the coming together of two or more parties to create a business where profits and liabilities are shared amongst the partners.
There are many benefits to a partnership structure, including tax advantages. Under current tax law, partnerships do not pay income tax. The tax responsibility is instead passed onto the individual partners, but because of this fact the business’s profits are not double-taxed in the way that a corporation’s profits often are. Another advantage of a partnership is that individual partners retain a lot of the decision-making that shapes the business and its future.
The disadvantages of a partnership
Although a partnership may seem enticing, before deciding on this business structure you need to be aware of its shortcomings, too. Perhaps the biggest is that, depending on the type of partnership created, individual partners can be held personally liable for judgments issued against the business as well as its other debts. There are steps that you can take in the creation of a partnership to limit this liability, though, which is why it’s important to discuss the particularities of your situation with your attorney.
Competently navigate your business creation
Dealing with the logistics of your business creation can seem cumbersome, and certain aspects of it can take a backseat to seemingly more important aspects of your business, such as advertising, hiring, and the securing of supply chains. Yet, business formation can be just as important to your business’s future, if not more so. Therefore, before embarking on your entrepreneurial endeavors, you may want to sit down with your attorney to develop a legal strategy that is right for you.