As you begin to grow your small business, you will start to acquire new ideas for products and services. It is key to protect these ideas as your company starts to develop them. Here are several types of business structures (S-Corp, LLC, Sole Proprietorship) that can help protect the idea.
Small Business Ideas – S-Corporations
An S-corp allows owners of small businesses to take advantage of certain tax benefits without giving up their limited liability protection through the corporation. An eligible domestic corporation can elect subchapter S status by filing IRS Form 2553 within two months and fifteen days after its first day of operations or prior to any time an “S” election was after October 16, 2006.
An S-corp is taxed like a partnership, which means that income and losses pass through to the owner. If you want to be an “S” corporation, your business must meet the following requirements:
•The corporation can only have one class of stock (you cannot sell different portions of your company)
•All shareholders must be U.S. citizens or resident aliens
•There may only be 100 shareholders
•Shareholders cannot be corporations, other “S” corporations or certain trusts and estates
Small Business Ideas – LLCs (Limited Liability Company) An LLC is a hybrid form of organization that combines elements of a partnership and a sole proprietorship/C-Corporation. With this structure, there are no restrictions
Any business owner who wants to protect their business idea should look into this type of structure.
Small Business Ideas – Limited Liability Company (LLC)
A limited liability company, commonly abbreviated as LLC, is a legal form of business that offers its members protection from personal liability for the debts or actions of the LLC. In return for providing this benefit, owners have slightly less control over decisions made by an LLC than they would have in a corporation. While most small businesses do not need to worry about being sued personally, it still makes sense to start an LLC since it provides protection against such lawsuits and limits your civil liabilities for your business debts and obligations. Your attorney can help you determine if starting an LLC is right for you.
Small Business Ideas – Sole Proprietorship
Sole proprietorships are the simplest business structure to start, which is why they’re the most common. A sole proprietor is simply someone who starts a business on his or her own for personal income or pleasure. The benefits of being a sole proprietor include low startup fees and taxes, minimal record-keeping requirements, increased privacy over other forms of businesses, and total control over all decisions made in your company. However, while sole proprietors enjoy some autonomy when it comes to making important decisions about their company, they are also personally responsible for everything that happens with their business. As you can see from this list of reasons to start a small business, many people choose this type of business structure to start a small business, but that doesn’t mean it’s the best choice in all cases.
SAFETY AND PROTECTION: This article discusses several different types of business structures, which can help protect your small business ideas from threats such as lawsuits or copyright infringement. These structures have been included for informational purposes only and do not constitute legal advice. Please consult an attorney before making any decisions about your company structure.