How Should You Organize Your Business?

Updated on September 6th, 2016
Organize your Business

As an entrepreneur, one of the most important decisions you will make is how to organize your business. There are different options, including LLC, LLP, S-Corp., and C-Corp. You also need to decide if it makes sense to use a business organization that includes the ability to be designated as a non-profit, or use some other qualification.

Deciding how to organize your business means a little thought about the purpose of your business, and how to protect it in in the long run.

Do You Expect Partners?

One of the first questions to ask yourself is whether or not you are partnering with someone. The way you organize your business can make a difference in the way things work with potential partners. Figuring out how to divide the profits, as well as who will do what in the business, are important items to address. Look into the different types of organizations to see what is going to work best with the type of partnership you are looking for.

Separate Your Business Liability

The best way to do your best to protect your personal finances from the liability related to your business is to organize your business in a way that allows you to keep things apart. When Donald Trump goes through a bankruptcy, it’s not his personal fortune on the line. Instead, it’s one of his businesses looking for protection and potentially needing to liquidate some of its assets. Consult with a knowledgeable accountant or business attorney to figure out how to best use your business organization to keep your personal and business separate and keep your business liability from impacting your personal finances.

What Do You Want to Accomplish?

Figure out your mission. What is the best business organization to accomplish your purposes? A non-profit corporation or a hybrid like the relatively new B-Corp. might help you fulfill a mission or contribute to a cause. If you hope to pass your business on to a successor, there might be another business organization that works better. Talk with someone who can help you understand the options, and help you choose a structure that helps you accomplish your preferred objectives.

Do You Want to Scale Your Business?

Depending on how you want to scale your business, different business structures make a little more sense than others. Sometimes the C-Corp. can do what the MLLP can’t. It’s important to have a vision for your business so you understand which structure will help you scale to your requirements. I don’t plan to scale my own freelance business to anything much beyond me and a virtual assistant or two. As a result, my current organization works really well. However, if I wanted to be able to scale further, and eventually hire employees and provide benefits, I would need a different business structure. It’s important to keep that in mind as you consider your organization, since you will want to avoid problems later.

How you organize your business can impact your tax situation, and limit what you can do as a business. Make sure you understand the implications of the different structures available to you, and consult with someone who can help you decide the best way to organize your business for the future.

Serenity Gibbons

Serenity Gibbons

Local Unit Lead for NAACP in Northern California with a mission is to ensure the political, educational, social, and economic equality of rights of all persons and to eliminate race-based discrimination. I enjoy writing and interviewing people making a difference in the World. Former Assistant Editor NY Times. NYU Alum living in sunny California.

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