Regardless of the size of your business, if you’re a sole proprietor or a simple partnership you and your business are legally the one and the same. This means if your business ever becomes liable for damages or excessive taxes, you could be held personally liable as well… putting all your assets at risk. But it doesn’t have to be that way.
By simply incorporating the proper structures around your business and personal assets, the courts and the IRS will recognize your business as a separate entity from you… it becomes its own legal “being.” There are many different types of entities and combinations to choose from…
Here are just a few:
Sub-chapter “S” Corporations where you can split how you take money out of the company to minimize your taxes.
“C” Corporations are taxed separately on their profits, not their income… so if there are no profits, there are no taxes (You STILL need to file tax returns). Their structure allows you to get many benefits paid for yourself and your family literally tax free.
Limited Partnerships or Limited Liability Companies (LLC) are a relatively simple formation popular with advantages for groups of partners. Real estate investors like LLC’s because they give the investors protection in the event a tenant or buyer decides to sue. If the tenant or buyer wins, the only thing available to pay the judgment is whatever is in the LLC. The investors’ other assets are safe.