Ultimately, your best bet is to sit down with whatever partners you have and a qualified and experienced business attorney to help you decide. If you’re in the greater Miami-Dade area, I’d love to help, so give the Law Offices of Yoel Molina a call and we can get started. Before you do, it helps to know a bit about the different types of business ownership structures you can choose from:
If you are a one-person business and you aren’t registered with the state as an LLC, then your business is a sole-proprietorship. Basically this means that all profits and losses are filed with your individual income taxes and that you don’t really have to do anything special or extra to maintain your status as a sole-proprietorship.
In a legal sense, there is no difference between the business and the owner. The debts and liabilities of one are also the debts and liabilities of the other.
A partnership is in many ways the same as a sole proprietorship with the large difference that a partnership has two or more business owners. No extra paperwork is needed for a partnership. Like a sole-proprietorship, partners pay taxes for the business for their share of the profits when they file taxes. Both are equally responsible for the entire amount of any claims or debts on the business as well.
If you don’t have much exposure, liability, or risk a partnership or sole-proprietorship is probably the best option. As an experienced small business attorney, I always recommend discussing your specific situation with an attorney before making decisions as they may have valuable insight into your situation.
Because they take a while to setup, are difficult to maintain, and costly in comparison to a typical partnership, I typically don’t recommend to my clients that they use this type of ownership structure. However, in certain circumstances it is the most ideal structure.
In a limited-partnership, there is one “general partner” who is the main creator or operator of the company and one or more “limited” partners who have invested into the company. The limited partners are limited in that they have little to no control over the day-to-day activities of the company, but they are also limited in that they are not liable for claims, debts or liens against the company. Because of the extra obligations and fees involved with such a setup, I highly recommend speaking with a qualified and experienced small business attorney first.
LLCs and Corporations
Though both an LLC and a corporation are more costly to setup and difficult to maintain than a typical partnership or sole-proprietorship, they both offer added protection to business owners in terms of liabilities and debts of the business.
An LLC also provides the added benefit of having a “pass-through” tax identity so that taxes are filed the same as with a partnership or sole-proprietorship.
A Corporation has the added benefit of allowing owners to publicly sell and trade shares of their business in the form of stocks.
Deciding which, if any, type of incorporation is right for your business requires examining several different aspects of your business. For this reason, I recommend discussing your decision with a qualified business attorney.
A cooperative is a business owned by its employees or members. Typically referred to as a worker’s co-op, these companies offer all employees the benefits of ownership. There are examples of these all over that provide food and groceries as well as other retail businesses. Though the circumstances are unique, the dream of a company made up of 100% true equals will continue to inspire new business owners to create a cooperative.
If your business works to carry out any educational, charitable, literary, scientific, or religious purpose, it can be classified as a nonprofit. This would mean it’d be tax-exempt. Though most businesses don’t qualify, if your business exists for the betterment of society, then you should look into filing as a nonprofit.
Still have questions?
Please call us for a free appointment with Miami business attorney Yoel Molina in our Miami office at 305-548-5020.