For entrepreneurs, the selection of a business formation for their company is a necessary step for expanding their business. Each type of business structure has advantages and weaknesses that must be evaluated when determining the appropriate structure for a business. If you require legal assistance to determine which business formation would benefit your company, consult with an experienced Towson business formation lawyer today.
At the Heyman Law Firm, our business law attorneys can help guide you through the process of establishing a particular business structure. We can help you weigh the pros and cons of a business formation to ensure whether they align with the goals for your business. To schedule a confidential legal consultation, contact the Heyman Law Firm at (410) 305-9287, or contact us online.
Factors to Consider When Choosing a Business Structure for Your Towson Company
Various factors must be considered when a business owner is selecting a business structure. The structure of the business will impact practically every aspect of the business from how the company is taxed to how profits are distributed. As a result, it is necessary to learn about the characteristics of each type of business structure.
Business Taxation
The manner in which a business is taxed will depend on the type of structure chosen. For example, C corporations are subject to double taxation. This means that the corporation is taxed when profits are earned and when the corporation distributes dividends to its shareholders.
However, there are some business formations where the owner of the business would be directly liable for taxes owed by the business. In a sole proprietorship, the profits and losses of the business would be included in the owner’s personal income tax.
In some cases, a business structure may provide that certain owners are taxed differently than others. Specifically, limited partners in a partnership may not have to account for self-employment taxes like general partners.
Liability for Company Actions
The structure of a business also affects the personal liability of the owners of the business. When choosing a business formation, the owner should be aware of how much legal liability they will have to endure.
In a sole proprietorship, the owner of the business will have unlimited personal liability. The reason for this is that a sole proprietorship does not operate as a separate entity from its owner. Sole proprietorships do not even require the owner to register their business with the state. As a result, a sole proprietor will be liable for any actions taken on behalf of their business.
Unlimited personal liability means that the personal assets of a business owner can be pursued if a legal judgment is made against the owner. Many business owners aim to avoid this level of liability by selecting a business structure that can shield them from liability.
Partnerships are unique because some types of partnerships can have unlimited personal liability. However, many business owners opt for a limited partnership. A limited partnership can shield certain owners of the business from liability for the actions of the partnership. In some cases, a general partner in a partnership could be liable for legal issues on behalf of the partnership.
The owners of a limited liability company (LLC) are not personally liable for the actions of the company. This means that any judgments against the LLC will only affect the assets of the LLC.
Owners in a corporation are not personally liable for the actions of the corporation despite what type of corporation is chosen. However, there are some instances where an owner could be held liable for the actions of an LLC or corporation. This typically occurs when there appears to be no difference between the owner and the company. For example, intermingling personal assets with company assets can be very troublesome.
To learn more about forming a business, you should continue reading and speak with an experienced Towson business law attorney today.
How to Form a Corporation in Towson, Maryland
Several steps must be taken to form a corporation in Maryland. The articles of incorporation are needed to register a corporation. The articles of incorporation will cover a number of factors that must be addressed before the business can be established.
The first issue is the name of the company. The name of the company should be thoroughly researched to ensure it is not in use by another corporation. In addition to having a unique company name, the company name must also include words that identify it as a corporation like “inc.,” or “corp.”
Other issues that must be determined when forming a corporation include:
- Statement of the purpose of the corporation
- Listing a principal place of business for the company
- How stocks will be structured
- The name and address of registered agents of the corporation (e.g., lawyer that represents the company)
- Names and addresses of company incorporators
- Number of directors upon registration and their names
There are also some costs associated with filing articles of incorporation. Our firm can help guide you through the process of registering a corporation.
Our Trusted Towson Business Formation Attorneys are Here for You
If you are concerned about choosing a business structure for your company, you should contact an experienced Towson business formation attorney today. The legal team at the Heyman Law Firm possesses extensive experience handling a variety of business law issues, and we are here to represent you and your business. To schedule a confidential legal consultation to discuss your business formation, contact the Heyman Law Firm at (410) 305-9287.