Why Is the Structure of My Business So Important?
There are tax considerations you need to consider when deciding the type of business you want to form as every business structure is taxed differently.
In addition, one of the main reasons you create an LLC, corporation or limited partnership for your business, rather than a sole proprietorship or general partnership is because you want to protect your personal assets from your business creditors and any potential lawsuits.
For example, let’s say you personally own a home, cars, have some savings in the bank and a pension. If your business has financial problems or is sued by another company, customer or employee, such that your business suddenly owes someone or some entity an amount of money that your business is unable to pay, the business form you choose can limit liability to just your business assets.
In this scenario, if your business is a sole proprietorship or general partnership, your personal assets may be taken to pay your business’ creditors. You may lose your house (subject to some small protections), your savings and any other valuables that may help pay off your business debts. If your business is a corporation, LLC, or limited partnership, then most likely your personal assets are protected from business’ creditors or judgments against your business. In the majority of cases, creditors are limited to the assets of the business and will not be able to pursue you individually.
If you have questions about anything discussed above, you should speak with an experienced attorney before you form any type of business structure. We are available to speak with you any time and our offices are conveniently located in Las Cruces.