You have decided to start your own business and need to take the next step to getting the doors open. Choosing the organizational form of your business can have important legal and tax implications as your company grows. Identifying professional goals early on will help you choose what works best for you.
The simplest organizational form is a sole proprietorship. In this business form, the owner and the company have the same legal identity. The sole proprietor personally owns all business assets and has personal liability for all debts. The owner pays taxes on business income the same as personal income; she or he also pays self-employment taxes.
While this is the most simple way to set up your business, anyone considering using a sole-proprietorship should understand that they could be held personally liable for the actions of the business. Carefully consider whether using this organization form is worth the risks.
Companies run as corporations have a legal identity apart from their owners, who pay taxes accordingly. Assets and liabilities belong to the corporation. The business pays corporate tax, and owners pay individual taxes on money they take out of the business. Corporations have much more regulation than other company structures, and they require owners to file more information with the state.
Between sole proprietorships and corporations in complexity, a partnership has multiple owners. In a limited liability partnership, all parties own the business assets but have personal liability only for their share of business liabilities and debts. A limited partnership has one partner with full liability for the business, who typically also has full, or at least substantial, control overall business activities. The other partners have both limited liability and limited control. Taxation most resembles a sole proprietorship.
Limited liability company
Limited liability companies combine features of partnerships and corporations. Owners do not have personal liability for the organization’s debts and liabilities. Generally, company income goes directly to the owners, who then have to pay self-employment taxes on all income produced by the business.
Georgia has additional information on the specifics of how to set up each type of business, as well as more details on pertinent regulations. The attorneys at Cooper, Barton & Cooper are knowledgeable about these types of businesses and can help you through all stages of your business, beginning with formation.