As you consider starting your own company, you may have many questions about the best way to structure your business. You may have heard advice from people who suggest that certain business entities can provide more benefits than others, but such advice may be contradictory and confusing.
You certainly want to establish your business in the manner that will be most advantageous for you. For many entrepreneurs, this decision typically includes a focus on minimizing your tax burden and protecting yourself from liability. If well-meaning friends are advising you to consider a corporation or LLC for your company's entity, it may help you to dispel some of the myths surrounding these options.
A shield of protection
Perhaps one of the most commonly misunderstood benefits of an LLC or corporation is that they protect your personal assets from lawsuits. While this is true, the protection these entities offer is quite limited. In fact, the protection provided by a corporation or LLC includes these factors:
- If your LLC or corporation is involved in a contractual lawsuit, your company's shield protects your personal assets from any debts or settlements that result.
- If your personal negligence, even in the course of working for the LLC or corporation, results in injury to someone or damage to someone's property, you may still be personally responsible for those damages.
- If an employee of your LLC or corporation or a contractor working for you causes some injury or damage, the corporate shield keeps your assets safe from any settlement.
If you decide on an LLC or corporation entity for your business, having adequate insurance coverage can provide a cushion in case your actions on the job place your personal wealth in jeopardy.
Looking to the future
No matter how long you've been self-employed, Wisconsin taxes have probably been one of those inescapable burdens. Perhaps you believe that you can reduce your tax load by incorporating in a state with lower taxes and running your company from a Wisconsin office. Unfortunately, the location where you conduct your business is the deciding factor in your tax bill. However, there are different treatments of LLCs and corporations that may help you ease your tax burden. An attorney can help you decide what is best for your circumstances.
When starting your business, it is nearly impossible to see what challenges may arise in the future. If you have partners or co-owners, disputes are likely to arise, and these may place the future of your business in peril. Both a corporation and LLC formation provide formal agreements to put procedures in place for many issues that may arise in the life of your business. Having strong legal groundwork established can increase the chances that your business will have a successful future.