Choose Your Business Structure (Wisely!)

Overview: The article asserts that issues of liability, taxation, ease of transfer of ownership, and access to capital will help determine the optimal business structure. The decision is important and depends upon the personal goals, so one probably wants to consult the business and tax attorneys. As a business owner, one will learn about many, many taxes of which the average employee has little knowledge. On the positive side, these contributions give one future Medicare and Social Security benefits. On the negative side, these taxes reduce the amount of money one can take home today. Becoming aware of the taxes and tax rates one face under the different business structures is crucial to minimizing the overall taxation. The disadvantage of being a sole proprietor is that one and the business are considered the same legal entity. If someone falls in the retail store and wins a big judgment against the retail company, structured as a sole proprietorship, that judgment is also against one as an individual. The disadvantage to paying a wage is that wages are subject to various employment taxes, for example, Social Security and Medicare taxes, in addition to income tax. Entrepreneurs and angel investors should study and learn about basic business structure.

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Format: HTML | Date: Jan 2003 | Pages: 1