As a Manhattan entrepreneur, you face a wide variety of important decisions on a daily basis. This is especially true when first getting a commercial enterprise off the ground, which entails selecting the right business structure for your specific needs. Your business’s designation can have a range of effects, and can even dictate your annual tax burden.
The IRS provides descriptions on the different types of business structures in order to help you understand how to find the option best suited to your individual business. Those involved in partnerships (which can apply to two people or greater) are only required to file an informational return on a yearly basis. However, all those within the partnership must declare their earnings and debits on personal returns. Contributions made during the course of a partnership are typically intended to be equitable (i.e. each party will contribute an equal amount into the business, as well as receive an equal return on in investment).
Limited liability companies (LLC) are somewhat comparable to partnerships. However, some business entities are unable to be classified as an LLC, including companies within the insurance industry and financial institutions. LLCs are attractive to many business owners in that their personal liability will be greatly diminished when dealing with debt and other matters. Typically, LLCs must be comprised of more than one person, although this can vary from state to state.
You may also be interested in designating your business as a corporation. Filing taxes as a corporation is a bit different from the first two options, as the corporation itself will be taxed. The tax rates that apply to corporations are also different, and in general corporations entail a lot more rules and regulations than other types of business structures. Although personal liability is minimal, your corporation can be held accountable for any issues related to its operation. The above is for informational purposes only, and as a result should not be taken as legal advice.