When you are making plans to open a new business in North Carolina, you are likely thinking about the types of business structures that are best for you and trying to determine how to form your business. There are a variety of business structures to choose from, and each has its benefits and limitations. While it may be possible to change business structures after you have opened your business depending upon your particular circumstances, it is usually in your best interest to choose the appropriate business structure for your needs from the start. As such, you should always work with a North Carolina business law attorney who can assist you with business formation.
The IRS provides details about business structures, as does the Small Business Administration (SBA). In the meantime, the following are some questions to think about as you consider what kind of business structure could best suit your needs.
Are You Opening the Business on Your Own?
If you are planning to start a business on your own (meaning that you do not plan to have other partners or business owners) a sole proprietorship is likely going to be the best legal structure for your business. However, it is important to understand that sole proprietorships are, for all intents and purposes, the same entity as the business owner. This means that all profits and losses for the business are handled on the business owner’s personal tax return, and the business owner is personally responsible or liable for business debts.
Indeed, if the business owner of a sole proprietorship wanted to file for bankruptcy—either personal or business bankruptcy—the owner would need to file for personal bankruptcy in order to manage the debts of the business since those business debts are, in effect, personal debts.
Are You Seeking a Business Structure that Limits Your Personal Liability?
If you want a business structure that will limit your personal liability, you should be thinking about a limited liability company (LLC) or a corporation. In general, LLCs and corporations limit the liability of owners or members so that they are not personally liable for business debts. However, there are situations in which personal liability can become an issue even in a corporation, which is an entirely separate entity from the owners or shareholders. In certain cases, “piercing the corporate veil” may be a way in which business owners can be held liable for the debts or actions of the corporation. More generally, though, LLCs are corporations are the best options for limiting liability.
Do You Plan to Go Public with Your Business?
If you have plans to go public—or in other words, if you want your business to eventually become publicly traded and to seek investors—some business structures are much better than others. First, some types of businesses cannot go public. Then, others make more sense for going public. You can have a publicly traded partnership. Generally speaking, however, corporations tend to be the better option for business owners who are planning to go public. Of course, corporations have benefits and limitations, and choosing to create a corporation might not make the most sense for you. It is important to discuss your choices with a business lawyer in Raleigh who can help you to select the best business structure for your needs.
Learn More from a Raleigh Business Lawyer
Do you have questions about business formation? One of the dedicated North Carolina business law attorneys at our firm can speak with you today about choosing a business structure. Contact Howard, Stallings, From, Atkins, Angell & Davis, P.A. for more information.