Starting a business requires a lot of work to develop a viable idea and market it properly. There’s another issue entrepreneurs in South Carolina need to consider when starting a business: the legal structure they want the company to take.
Types of business structures
Business formation doesn’t have to be complicated. Many small businesses are set up as sole proprietorships, which is the least complicated business structure. It does mean that the founder is completely responsible for all of the earnings and debts of the business, though. That level of liability can be risky to assume.
There are two kinds of partnerships. In a general partnership, people share the liability for debts and assets equally. In a limited partnership, they are liable only up to the amount they’ve invested. However, limited partners also have less control. Partnerships are similar to sole proprietorships in that they are easy to set up and require little paperwork.
LLCs, or limited liability companies, are somewhat like a partnership. As the name suggests, they make it possible for the individual partners to limit their personal liabilities. LLCs are regulated at the state level, so the amount of protection this structure offers will vary by location.
Finally, some businesses are corporations. Corporations are treated as a totally separate entity from the people who run them. In fact, there’s a legal saying that they’re people, too. Corporations in the United States enjoy most of the same rights as people do, such as owning property. There are several types of corporations, including S Corps that make it possible for small businesses to avoid double taxation.
Selecting a business structure
Choosing the right structure for your business can help you limit your tax and legal liabilities in the long run. It’s important to do your research before making a decision.