One of the primary considerations in selecting a legal entity for your business is protecting yourself and the other business owners from liability. Other considerations are: the transferability of ownership rights, the ability to continue as a business in the event of the death or withdrawal of one or more of the partners, the capital needs of your business, and tax liabilities.
The business structure you select will determine the legal requirements of your business. Utah has specific laws pertaining to the regulations with which you as a business owner are required to comply. I provide prompt, responsive and affordable legal counsel to help you determine which legal structure is right for your business.
Which Legal Entity for Your Business or Real Estate Transaction?
Limited Liability Company (LLC)
LLCs are the most popular way for small businesses to get started. An LLC, or Limited Liability Company isn’t taxed any differently than a sole proprietorship, but provides better liability protection, if set up and maintained properly. With an LLC your personal assets have more protection than a sole proprietorship or partnership. We can help you organizing your Utah LLC for a low flat rate. LLCs are governed by an Operating Agreement that requires some thought based upon the goals and objectives of your business. Not all Operating Agreements are the same–make sure you enact what you need. If an LLC has more than one owner, you should seriously consider a Founders Agreement to define rights between the initial founders.
C Corporation (C-Corp)
Utah C Corporations are taxable entities, meaning the corporation is taxed on its income before it is distributed to the shareholders. After corporate taxes are paid, a corporation distributes income to its shareholders in the form of dividends. Shareholders are then required to pay individual tax on the dividends. This is known as double taxation. Before forming a C Corporation you should carefully consider the balance between liability protection and potential tax implications. (Read More)
S Corporation (S-Corp) tax filing Election with the IRS
An S Corporation is often mistaken for a type of legal entity, but it isn’t. An S-Corp is a tax election filed with the IRS. Either an LLC or a corporation may file a form with the IRS to be taxed as a small business corporation (S-Corp). In an S-Corp election, business profits are “passed through” to the owners to be reported on the owners’ personal tax returns. No taxes are paid by the corporation. S Corporations can provide some savings on self-employment taxes for the owners depending on whether earnings are appropriately reported as “salary” or a “return on investment.” (Read More)
Sole Proprietorship or Partnership (Don’t Do Business This Way!)
A sole proprietorship is the most risky type of business structure and should generally be avoided as should a straight partnership between individuals. If you are sued or fall behind on debt payments, your personal assets (house, cars, etc.) can be at risk. If you do not form a separate legal entity, Utah will automatically consider your business to be a sole proprietorship or partnership. (Read More)