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Which Business Entity Is Best?

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Which Business Entity is Best?
BUS670: Legal Environment Leah Westerman January 13, 2015 The first step of many, in the business process is determining the type of entity your business will be. According to Hopson and Hopson (2014) “Usually, concerns over minimizing personal liability, reducing taxes, or becoming more tax efficient drive a business owner’s decision to change the way a company does business.” The options for your type of entity include sole proprietorships, public held corporations, private held corporations, limited liability corporations (LLC), franchises and limited partnerships (LLP). Each type of business runs the risk of being sued for numerous reasons. However, the type of business you own will determine your personal liability exposure as an owner as a result of the lawsuit. A common lawsuit companies are faced with is for a breach of contract. A LLC is one of the smartest choices for a business. According to Hopson and Hopson (2014) “Despite its relative newness, the LLC is now the entity of choice for many because of its flexibility. It allows all members to participate in management, unless the owners elect otherwise in the company’s articles of organization. An LLC takes the advantages of a corporation and combines them with the flexibility and passthrough tax treatment of a partnership, has relatively inexpensive startup costs, and is easy to manage.” It can have a number of owners or a single owner. A LLC is a structure that is a combination of a sole proprietorship and a corporation. The owners of a LLC use their personal income tax returns to report losses and profits of their company because a LLC cannot be taxed separately. However, if the company was sued…...

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