There are many important decisions a Louisiana business owner will need to make at the early stages of launching a new company. One of these is the decision on the specific type of entity that will best suit the business long-term. Entity selection is a choice that will impact matters pertaining to taxes, the owner’s personal liability for business debts and more. Making the right decision is critical as it will have long-term consequences for the future operations of the business.
When considering what will be best for your business, it will be helpful to have a long-term perspective. There are three specific factors you would be wise to consider as you think about the most beneficial entity selection for your company. As a business owner, your professional decisions have the potential to impact you on a personal level as well.
Three important factors for consideration
When choosing a business structure, you will want to consider the potential legal, tax and personal ramifications of this choice. There are three important factors you would be wise to consider as you look at your options for entity selection, including:
- Personal liability — You must consider how your choice could impact your personal liability for business-related debts. Certain entities offer more protection than others. For example, in an LLC, only the company can face a lawsuit, not the owner of the company.
- Taxes — The choice of entity will affect the taxes you pay and whether you are personally liable for any back taxes owed by the business. For example, in a sole proprietorship, the owner is personally liable for all business taxes.
- Industry — The type of business will affect the choice of entity. In certain industries that involve high risk, such as real estate investment, an entity choice that limits personal liability is a prudent selection.
Before making your choice of a business structure, it is helpful to carefully consider short-term goals and long-term objectives for your company. In addition to shielding yourself from the potential for financial loss on a personal level, you will want to choose a structure that will lay the best foundation for the future of your company. An evaluation of your business plan, challenges unique to your industry and personal concerns can help you make a practical decision.