Choosing the right structure for your business is a vital part of operating a successful business. The type of business formation chosen by a business owner will determine many other factors about the business operates. As a result, every potential business owner should be aware of how their choice will impact their company. If you require assistance selecting a business formation that meets your unique needs, you should consult with an experienced Columbia business formation attorney today.
The Heyman Law Firm recognizes the importance of selecting the business formation appropriate for your company, and we are here to help you resolve this issue. To schedule a confidential legal consultation to discuss your case, contact the Heyman Law Firm at (410) 305-9287, or contact us online.
Types of Business Formation Available in Columbia, Maryland
Every state may have different regulations regarding the establishment of a particular business structure. As a result, it would be wise to consult with an experienced attorney that can help you navigate the process of selecting a business structure. Our firm can inform you about the various types of business structures and how each type can affect your company. The following is a list of business formations available in Maryland.
Corporate Formation
Incorporation is the act of establishing a business as a corporation using Articles of Incorporation that adhere to the laws of the state where the corporation is being established. A corporation allows shareholders to purchase stock in the corporation with the use of money or property.
While shareholders will own stock in a corporation, they cannot be held personally liable for actions committed by the corporation. In many cases, the officers of the corporation cannot be held personally liable for the actions of the corporation.
All profits earned by the corporation is taxed at the time that it is earned. Profits are again taxed before being distributed to shareholders as dividends. As a result, corporations are double-taxed and cannot seek a tax deduction making dividends to shareholders.
A business owner should also determine whether they wish to select a C-corporation structure or a sub-chapter S corporation. The main difference between a C-corp and S-corp is a change in how the corporation is taxed. Many small business owners opt to form an S-corporation if they have no intention of making their company public.
Limited Liability Company
Like corporations, limited liability companies (LLC) typically prevent the owners of the company from being personally liable for acts committed by the company. This means that the personal assets of the LLC cannot be pursued in a lawsuit.
Generally, the owners of an LLC are not limited by state law. This means that an LLC could have a single owner, or a mix of people and entities can own the LLC.
Additionally, an LLC will be taxed depending on various factors like the number of members, and the decisions made the business owners when selecting the business structure. For example, an LLC can be taxed as a corporation, partnership, or another type of entity.
Sole Proprietorship
A sole proprietorship is a business operated by a single owner. However, unlike a limited liability corporation, the owner of a sole proprietorship can be held personally liable for the actions of the business. This means that any successful lawsuits against the business can be pursued against the personal assets of the owner.
Additionally, the owner of a sole proprietorship is also liable for all debts, losses, and profits of the business. These details must be included in the owner’s tax return.
There is no particular process to follow in order to create a sole proprietorship. The owner of the business could simply begin to offer their services to customers. However, it would be wise to at least create a business account to avoid the intermingling of funds.
Partnerships
A partnership is a business operated by two or more people whose level of liability is determined by their status in the company. The owners of a partnership can be categorized into general partners and limited partners.
General partners can be held liable for debts accumulated by the partnership or for actions taken by the partnership. Limited partners typically only invest in a partnership and cannot be held liable for issues that occur in the day-to-day operations of a partnership.
Additionally, partnerships have pass-through taxation. This means that each partner must document their share of the partnership’s losses and profits on their personal income tax return.
There are advantages to each type of business structure, depending on the goals of a potential business owner. Our firm can help you align your goals with the proper business structure to ensure that your business can operate efficiently.
Our Experienced Columbia, MD Business Formation Lawyers are Here to Work with You
If you need legal aid when choosing a business formation, contact an experienced Columbia, Maryland business formation lawyer today. The legal team at the Heyman Law Firm possesses extensive knowledge regarding the formation of businesses, and we are prepared to help you manage your business formation problem. To schedule a confidential legal consultation, contact the Heyman Law Firm at (410) 305-9287.