Establishing a legal entity under which to operate your business can help you limit your personal liability for business debts and allow you to take advantage of certain tax benefits.
Here are three common types of business entities to consider launching if you seek to advance your company while protecting your own interests.
1. Limited liability company
LLCs provide protection to business owners from most liability as well as some tax advantages. They are popular for small companies because they are fairly simple to form and have fewer legal requirements than some alternative entities. One key difference between LLCs and corporations is the lack of shareholders since one or more individuals own LLCs.
2. Corporation
A corporation is officially formed when the owner files Articles of Incorporation with the state. This entity holds the corporation responsible for the debts of the company while the owners are responsible only for the funds they contributed. Shareholders own a corporation through individual shares. These businesses pay taxes like corporate income in addition to taxes on shareholder dividend distributions.
3. S-corporation
S-corporations are also formed by filing Articles of Incorporation with a state. Owners benefit from the same limited personal liability as with a regular corporation. However, S-Corporations pay taxes on dividends only upon their distribution to shareholders.
If you are a business owner seeking to safeguard your personal assets and limit your tax liability, consider founding one of these three legal entities. Speaking with an attorney experienced with the formation of legal entities in Indiana could be beneficial to you.
