Why Form a Business Entity

Arguably, the largest benefits of creating a formal business entity to house your business are: (1) Legal protection for the business owners; (2) Tax savings; and (3) Creation of a professional image for your business.

Legal Protection For Business Owners

Generally, a business that is owned by one person who operates the business in their personal capacity, where that one person owns all the assets and owes all liabilities of the business by default is a sole proprietorship. It follows that a business where two or more people voluntarily operate a business together in their joint capacities, where each partner carries equal shares of the liabilities and profits of the business is generally by default a Partnership or General Partnership.

Generally, Sole Proprietorships and Partnerships provide no legal protection for their owners. Thus, the business owners could potentially be held personally liable in situations where a business is found liable for a civil judgment for monetary damages to a plaintiff claiming injury or other damages under law, arising from alleged actions of a business.

Generally, in the United States, business entities such as corporations and limited liability companies (LLC), properly formed under state laws, some requiring specific tax documentation filed with the Internal Revenue Service (IRS), such as documentation to form an S-Corporation from an often initial default C-Corporation. If an entity such as an LLC or S-Corporation is properly operated under governing law, the entities can shield the business owner from personal liability in situations where a business is found liable for a civil judgment for monetary damages to a plaintiff claiming injury or other damages under law, arising from alleged actions of a business.

Tax Savings

Depending on factors such as profitability, business expenses and other issues such as size of a business, the business owners could potentially save on taxes by choosing an appropriate business entity. Seek the advice of a qualified tax professional to learn the best way to minimize your exposure prior to forming a business entity.

Professional Image

A properly enacted and run business entity projects an image of professionalism, thus creating consumer confidence in the business and its products and services.

Contact Biazzo Law today to see how our experienced Business Attorney and Civil Litigator can assist your business with its contract needs.