LLC

business legal structure

A Guide to Choosing the Right Legal Structure for Your Business

Grace TrevinoBusiness

Everyone who seriously thinks about their own business sooner or later will have to determine their status. Which organizational structure to choose – an individual entrepreneur or a Limited Liability Company (LLC)? And if you create your own organization, what kind of organizational and legal form should you choose? LLC is one of the best options for small and medium-sized businesses.

LLC is a company set up by one or several people, the approved capital divided into shares. You can find an online that will help you convert your business to this model. Sole proprietorship or individual entrepreneurship is another option that can work for your business. Choosing the light legal structure may prove difficult. We will explain to you how you can choose the best.

How to Choose the Right Legal Structure for Your Business

Limited Liability CompanyThe first thing to consider when answering the question “which legal structure to choose?” when creating a business is the level of responsibility for the results of activities.

An individual entrepreneur is liable for his obligations with all property belonging to him, except for property on which, under the law, collection cannot be levied.

Responsibility for the results of the activity of a legal entity is limited to the amount of the value of the contribution made.

Second: the complexity of registering a business and the amount of registration costs

The easiest way is to register as an individual entrepreneur. Organizational costs will also be the most minimal.

For a legal entity, the registration costs will be higher, and the registration procedure will be more complicated. If you choose the form of organization of a legal entity, then, according to the specified criteria, LLC will be the undisputed option.

Third: the amount of the authorized capital

To register as an individual entrepreneur, the presence of authorized capital is not required – this is also an additional advantage of the status of an individual entrepreneur.

Fourth: accounting, tax accounting, and taxation

Accounting requirements are simplified as much as possible for individual entrepreneurs, and for accounting for a legal entity, you will need special knowledge. However, when applying special tax regimes, there is practically no difference.

The requirements for tax accounting are the same, but in practice, they are more loyal to individual enterprises. Taxation depends on the application of the appropriate regime: general, simplified, unified tax on imputed income.

Thus, to give an unambiguous answer to the question “which business legal structure to choose?” is impossible. Each option has its own nuances, pros, and cons. The decision should be made taking into account the specifics and characteristics of the future business.…

company building

Mistakes to Avoid When Starting a Limited Liability Company

Grace TrevinoBusiness

Starting a new business can be both exciting and intimidating at the same time, especially if you are doing it for the first time. You are bound to make mistakes, some of which may determine the success of your business. By choosing to create a limited liability company, you will have already avoided one of the main mistakes. However, there are some possibilities of making mistakes when setting up an LLC business. Some of the possible mistakes you can make are highlighted below.

entrepreneurChoosing the Wrong State

If you choose to create an LLC, you have to decide where to register it. Most entrepreneurs usually register their companies in the state where they live, mostly because of the tax benefits they stand to gain. However, that is usually not always the best idea, especially for smaller companies. Incorporating your business in the state where your business is based will likely give you more benefits than the tax benefits you might gain when you incorporate it in your home state.

Choosing the Wrong Name

To ensure you choose the best name for your company, you need to do extensive research. The priority should be to ensure another company is not already using the name you choose. Failure to do so can result in you violating the trademark of another company, which can get your business in a lot of trouble. Name disputes can result in time-consuming and expensive lawsuits. Losing the lawsuits might result in you losing your goodwill and brand recognition.

business planNot Creating Corporate Governance Documents

Another common mistake is creating an LLC without creating corporate governance documents. That is quite common among entrepreneurs who start their business with family members or friends. Governance documents usually lay out all the rules to be used whenever an unpleasant situation or disagreement arises. The rules can help to protect partner’s investments, relationships between partners, and the entire business. The two most important documents to start with are a buy-sell agreement and an operating agreement.

Not Hiring Legal Help

The process of registering an LLC is usually quite easy such that you can do it yourself. However, experts recommend hiring a lawyer, especially if you plan to operate in different states, take money from investors, or have different partners. Hiring a lawyer might add to your costs, which is why people make the mistake of not hiring one. However, the value of getting professional legal assistance is usually worth more than the cost for such cases.  …