Structures are the heart and soul of starting a business. They help to determine personal liability as well as how much you pay in taxes. The following are a few of the most basic types of business structures. Become familiar with what they are before meeting with your lawyer to determine how best to proceed.

What Are the Types of Business Structures?

1. Corporation

A corporation functions completely separate from its shareholders. If one or more of whom were to sell their portion of the shares, the company would continue to function with little to no affect. This does require a higher cost to establish through a lawyer, but offers a level of protection from personal liability that’s hard to beat.

While they have to pay income tax on their profits, these businesses can make money off of the sale of their stock, which is ideal for those that plan to franchise. It provides a semi-reliable source of income and could help new entrepreneurs to reach their goal.

2. Limited Liability Partnership (LLP)

As one of the simplest forms of entrepreneurship, an LLP presents an opportunity for one or two people to open a business. Protections are in place for each partner against any debts that they accrue and won’t hold each responsible for the other’s actions.

Partners will file an annual information return in order to report income, deductions, gains, and losses. Rather than the partnership paying income tax, all profits and losses pass through to the business owners’ personal tax returns, where they’ll report their share of the income or loss for that year.

In New Mexico, this is actually one of the few asset protection entities available. It has several advantages over trusts.

3. Limited Liability Company (LLC)

Also known as an LLC, these business structures don’t restrict ownership to individuals. Memberships can include corporations, other LLCs, and foreign establishments. When setting up this type of business with your lawyer, New Mexico allows for an unlimited number of members.

Depending on your elections, the IRS will treat the LLC as a corporation, partnership, or as a part of the individual’s tax return. They offer substantial protections for personal assets, such as vehicle, property, and savings accounts, in the event of bankruptcy or a lawsuit.

If you’re considering a new business endeavor, reach out to Bristol Law Office of Roswell, NM. He has more than 30 years of experience and provides quality legal counsel on all matters regarding business law. He also excels as a real estate and family law attorney. Having received the Robert H. LaFollette Pro Bono Award for his exceptional work, this local lawyer is ready to provide the attention that your ideas deserve. Call (575) 625-5284 to request a consultation or visit his website for a full list of services.