Find out which business structure is best for you (3 of 3)

      Sole proprietorship, partnership, LLC or corporation? Which structure is best for you? Sole proprietorship, partnership, LLC or corporation? Which structure is best for you?     Hi  Welcome back! In the previous two emails we looked at Sole Proprietorships, Partnerships and LLCs as we introduced you to the world of business structures. Today we simplify the sometimes confusing area of corporations, the pros and cons, and which one may be best suited for your business. Hi  Welcome back! In the previous two emails we looked at Sole Proprietorships, Partnerships and LLCs as we introduced you to the world of business structures. Today we simplify the sometimes confusing area of corporations, the pros and cons, and which one may be best suited for your business. Corporations  There are four different types of corporations : C-corp, S-corp, B-corp and nonprofit.  C-corp  A C-corp protects the liabilities of its members by standing as its own legal entity. This means that only the corporation is held liable for any losses. [The main benefit of a C-corp structure is its ability to legally distribute shares to investors, which makes funding much simpler to obtain than it is for the lower business structures.](  Advantages of a C-corporation  Asset protection - C-corporations offer a superior level of personal asset protection in the instance of a lawsuit.  Easier to secure funding - Since corporations can issue a legal share certificate to their investors, it's much easier to secure funding with these structures.  Owners are separate entities to the company - Such clear segregation is what keeps personal assets safe from business liabilities.  Unlimited life - Since corporations are categorized as independent entities from their members, if any of its owners withdraw or die the company will still remain in operation.  Disadvantages of a C-corporation  Complicated on-boarding process - The on-boarding process of corporations can be quite overwhelming. Members need to provide highly detailed reports about the structure of the prospective company.  Some examples of the types of details required in these reports are: - Comprehensive break down of share distribution amongst members - Board of directors - Official corporate strategy - Schedule of formal meetings for shareholders - Formal decision making process for all major scenarios  Twice the tax - This is probably the main drawback of C-corp structures. Members are taxed twice, once at the corporate level and again at a personal level after receiving profit dividends.  Expensive - C-corporations are expensive to establish. The cost varies at a state level, you could find yourself paying $1,000 or more.  S-corp  This variation of the corporate structure was put in place to bypass the double taxation issue.  Not everyone can choose an S-corp structure. The IRS has laid out a specific set of requirements that must be met before submitting an application for this business type.  Some of these requirements are listed below: - Shareholders must be U.S citizens. - No more than 100 shareholders. - Not be categorised as an ineligible entity, such as a financial institution, insurance companies and a domestic international sales company.  B-corp  A B-corp (benefit corporation) is a for-profit version of a non-profit. [B-corporations operate on a for-profit basis while at the same time exercising a charitable outreach.]( So if you have a charitable heart and you want access to company profits, a benefit corporation structure is a great option.  Advantages of a B-corporation Personal satisfaction - The personal satisfaction B-corp owners feel when they see firsthand how those in need have benefited from their efforts is sometimes a lot more rewarding than seeing profit margins rise.  A sense of community - When you start a B-corp you join a community of like-minded businesses owners who are also on a mission of a difference while making a profit. B-lab is the certifying body that regulates benefit corporations and also encourages collaboration and inspiration between b-corp companies.  More media exposure and more customers - A major benefit of being a B-corp is that others want to hear about your charitable activities. This can lead to a high number of interview requests and public relations opportunities.  This is an advantage your business will have over your competitors. If a customer has the choice of purchasing the same product from a competitor that isn't a B-corp, they're more likely to choose you because of your charitable impact.  Disadvantages of a B-corporation  Taxed twice - Benefit corporations are taxed the same way that c-corpoations are taxed, both at a corporate level and again at the personal level when you receive company profits.  More paperwork - B-corps are required to complete a benefit report to inform the public of all of their charitable activities performed in that particular year.  Nonprofit business structures  The primary goal of a nonprofit organization is to benefit the public through charitable work. As the name suggests, nonprofits are not driven by profits. In a conventional business structure, all profits can be funneled to members. [In a nonprofit structure, all profits must be funneled back into the company to further fuel its work.](  Advantages of a nonprofit  Personal satisfaction - Just like benefit corporations, nonprofit owners have the satisfaction of knowing that their corporate efforts are resulting in the needy being helped.  Less taxes - Nonprofits are exempt from income tax, so more of the money can be funneled back into the organization to further power its social impact.  Eternal life - Nonprofits can still remain in operation even after their members withdraw. This seamless restructuring of management is one of the benefits of a business that's classified as a separate entity to its members.  Liability protection - Owners of nonprofits are not personally liable to any debts or losses associated with the company.  Grant eligibility - Nonprofits are eligible to receive grants from the government to fund their operations.  Disadvantages of a nonprofit  Costly and time-consuming start up - A lot of paperwork needs to be submitted in order to convince the IRS that your organization will be operating with a community-centric purpose and therefore should be exempt from taxes.  Difficult to get funding - There are limited grants available for nonprofits and almost every nonprofit in the country is competing for them, so the odds of securing one are not very high.  Strict yearly reporting - Just like B-corps, nonprofits are required to keep the public informed of their charitable efforts by releasing an annual report. Anyone can scrutinise the operations of a nonprofit and demand to see a report of their activities at any time.  Conclusion  The structure you choose for your business depends on the level of risk your operations pose to your clients. If the threat of a possible lawsuit keeps you up at night, you should start with an LLC or a corporation structure. The comforting thing about choosing a simple business structure is that you always have the option of upgrading at any time.  Tune in next time for the secrets on how to staff your startup in todays digital workplace.  And always remember, the information contained in this email is in no way legal, financial or tax advice. Please check the relevant legal, financial or tax departments within your local area before making any decisions. Corporations  There are four different types of corporations : C-corp, S-corp, B-corp and nonprofit.  C-corp  A C-corp protects the liabilities of its members by standing as its own legal entity. This means that only the corporation is held liable for any losses. [The main benefit of a C-corp structure is its ability to legally distribute shares to investors, which makes funding much simpler to obtain than it is for the lower business structures.](  Advantages of a C-corporation  Asset protection - C-corporations offer a superior level of personal asset protection in the instance of a lawsuit.  Easier to secure funding - Since corporations can issue a legal share certificate to their investors, it's much easier to secure funding with these structures.  Owners are separate entities to the company - Such clear segregation is what keeps personal assets safe from business liabilities.  Unlimited life - Since corporations are categorized as independent entities from their members, if any of its owners withdraw or die the company will still remain in operation.  Disadvantages of a C-corporation  Complicated on-boarding process - The on-boarding process of corporations can be quite overwhelming. Members need to provide highly detailed reports about the structure of the prospective company.  Some examples of the types of details required in these reports are: - Comprehensive break down of share distribution amongst members - Board of directors - Official corporate strategy - Schedule of formal meetings for shareholders - Formal decision making process for all major scenarios  Twice the tax - This is probably the main drawback of C-corp structures. Members are taxed twice, once at the corporate level and again at a personal level after receiving profit dividends.  Expensive - C-corporations are expensive to establish. The cost varies at a state level, you could find yourself paying $1,000 or more.  S-corp  This variation of the corporate structure was put in place to bypass the double taxation issue.  Not everyone can choose an S-corp structure. The IRS has laid out a specific set of requirements that must be met before submitting an application for this business type.  Some of these requirements are listed below: - Shareholders must be U.S citizens. - No more than 100 shareholders. - Not be categorised as an ineligible entity, such as a financial institution, insurance companies and a domestic international sales company.  B-corp  A B-corp (benefit corporation) is a for-profit version of a non-profit. [B-corporations operate on a for-profit basis while at the same time exercising a charitable outreach.]( So if you have a charitable heart and you want access to company profits, a benefit corporation structure is a great option.  Advantages of a B-corporation Personal satisfaction - The personal satisfaction B-corp owners feel when they see firsthand how those in need have benefited from their efforts is sometimes a lot more rewarding than seeing profit margins rise.  A sense of community - When you start a B-corp you join a community of like-minded businesses owners who are also on a mission of a difference while making a profit. B-lab is the certifying body that regulates benefit corporations and also encourages collaboration and inspiration between b-corp companies.  More media exposure and more customers - A major benefit of being a B-corp is that others want to hear about your charitable activities. This can lead to a high number of interview requests and public relations opportunities.  This is an advantage your business will have over your competitors. If a customer has the choice of purchasing the same product from a competitor that isn't a B-corp, they're more likely to choose you because of your charitable impact.  Disadvantages of a B-corporation  Taxed twice - Benefit corporations are taxed the same way that c-corpoations are taxed, both at a corporate level and again at the personal level when you receive company profits.  More paperwork - B-corps are required to complete a benefit report to inform the public of all of their charitable activities performed in that particular year.  Nonprofit business structures  The primary goal of a nonprofit organization is to benefit the public through charitable work. As the name suggests, nonprofits are not driven by profits. In a conventional business structure, all profits can be funneled to members. [In a nonprofit structure, all profits must be funneled back into the company to further fuel its work.](  Advantages of a nonprofit  Personal satisfaction - Just like benefit corporations, nonprofit owners have the satisfaction of knowing that their corporate efforts are resulting in the needy being helped.  Less taxes - Nonprofits are exempt from income tax, so more of the money can be funneled back into the organization to further power its social impact.  Eternal life - Nonprofits can still remain in operation even after their members withdraw. This seamless restructuring of management is one of the benefits of a business that's classified as a separate entity to its members.  Liability protection - Owners of nonprofits are not personally liable to any debts or losses associated with the company.  Grant eligibility - Nonprofits are eligible to receive grants from the government to fund their operations.  Disadvantages of a nonprofit  Costly and time-consuming start up - A lot of paperwork needs to be submitted in order to convince the IRS that your organization will be operating with a community-centric purpose and therefore should be exempt from taxes.  Difficult to get funding - There are limited grants available for nonprofits and almost every nonprofit in the country is competing for them, so the odds of securing one are not very high.  Strict yearly reporting - Just like B-corps, nonprofits are required to keep the public informed of their charitable efforts by releasing an annual report. Anyone can scrutinise the operations of a nonprofit and demand to see a report of their activities at any time.  Conclusion  The structure you choose for your business depends on the level of risk your operations pose to your clients. If the threat of a possible lawsuit keeps you up at night, you should start with an LLC or a corporation structure. The comforting thing about choosing a simple business structure is that you always have the option of upgrading at any time.  Tune in next time for the secrets on how to staff your startup in todays digital workplace.  And always remember, the information contained in this email is in no way legal, financial or tax advice. Please check the relevant legal, financial or tax departments within your local area before making any decisions. Need help choosing how to best structure your business? Then hire an expert business consultant for advice on which option is best for you! Need help choosing how to best structure your business? 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