Strange Things About Different Business Entities
- Date: 2007-02-01 - Word Count: 394
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If you are contemplating forming an entity for your business, there is a lot of information to consider. Here are some of the more esoteric things you will not see discussed in most how to guides.
The Next Google - Ambition and hope are the two attributes of any new business. Nobody starts a business because they think it will produce just enough profit to get by. You, me and the guy down the street all think we are going to make billions and be the next Google. Obviously, most of us are wrong. Nonetheless, success is in the planning. If you hope to go public with your business one day, your choice of business entities is really simple. The only business entity that can be taken public is the C corporation. You cannot take a limited liability company public, so keep this in mind when you make your choice.
You Are A Professional - If you are a licensed professional, the idea of forming a business entity to protect yourself makes obvious sense. There is, however, a major problem. In many states, you cannot escape personal liability by doing so. In fact, many states will not let you form a corporation nor LLC for your practice. Instead, you must form a Professional Corporation or the like. These entities tend to be heavily taxed, so make sure you know what you are getting into.
Protection From Liability - As you probably know, a corporation or LLC protects you from personal liability should the business run into trouble. This is great and all, but it still leaves you with a problem. All of the assets in the business can be lost! If the business has few assets, it really doesn't matter. On the other hand, this can be a disaster for a business with a lot of expensive equipment for manufacturing, tools, property and so on. If you are facing this situation, consider forming two entities. One deals with the public and the risk associated with that. The second one holds all the valuable assets and leases them to the at risk entity.
Forming a protective entity make a lot of sense for most businesses. That being said, taking the time to think through the process is critical to getting the most out of them.
Richard A. Chapo is with SanDiegoBusinessLawFirm.com - providing limited liability company formation in California.
The Next Google - Ambition and hope are the two attributes of any new business. Nobody starts a business because they think it will produce just enough profit to get by. You, me and the guy down the street all think we are going to make billions and be the next Google. Obviously, most of us are wrong. Nonetheless, success is in the planning. If you hope to go public with your business one day, your choice of business entities is really simple. The only business entity that can be taken public is the C corporation. You cannot take a limited liability company public, so keep this in mind when you make your choice.
You Are A Professional - If you are a licensed professional, the idea of forming a business entity to protect yourself makes obvious sense. There is, however, a major problem. In many states, you cannot escape personal liability by doing so. In fact, many states will not let you form a corporation nor LLC for your practice. Instead, you must form a Professional Corporation or the like. These entities tend to be heavily taxed, so make sure you know what you are getting into.
Protection From Liability - As you probably know, a corporation or LLC protects you from personal liability should the business run into trouble. This is great and all, but it still leaves you with a problem. All of the assets in the business can be lost! If the business has few assets, it really doesn't matter. On the other hand, this can be a disaster for a business with a lot of expensive equipment for manufacturing, tools, property and so on. If you are facing this situation, consider forming two entities. One deals with the public and the risk associated with that. The second one holds all the valuable assets and leases them to the at risk entity.
Forming a protective entity make a lot of sense for most businesses. That being said, taking the time to think through the process is critical to getting the most out of them.
Richard A. Chapo is with SanDiegoBusinessLawFirm.com - providing limited liability company formation in California.
Related Tags: business, legal, law, corporation, professional, llc, limited liability company, entity, go public
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