If you are considering starting a new business, one of the first and most important decisions you will make is business entity selection. There are many types of business entities with advantages and disadvantages to each. Business entities are subject to the laws of the states where they are established, but there are some general characteristics common to each type:
- LP/LLP: The LP/LLP entity provides liability protection to the limited partners only. Taxes are filed as a partnership status. The partners can have unlimited liability and the death of any partner dissolves the LLP.
- Corp and S- Corp: A Corp or S- Corp is a separate entity with rights and liabilities that are separate from the owners’. An advantage is that the owners are not at risk of losing assets due to a liability exposure. Unlike the partnership entity, a corporation’s income is distributed to stockholders through dividend payments. The corporation requires more complicated start-up work than some other entities.
- LLC: The limited liability company has some advantages in liability protection for the owner. The owner is not personally responsible for the debts of the business, with some exceptions, such as fraudulent activity. You can report profits and losses on an individual tax return.
- Partnership: A partnership is one of the simplest types of business entity types. It requires less paperwork to be established and the partners share joint liability. While it is simple to start, a partnership has some disadvantages in that any partner can be held legally liable for business debts.
If you are looking for help in choosing the best organization type to protect your business and personal assets, we at Tushaus & Associates can help. We also provide accounting and consulting services, and have been proudly serving businesses in the Milwaukee area since 1965.
