You’ve been training to become a plumber. You’ve worked alongside others who have taught you the craft, and you’re finally getting your licensing to work on your own. You’d like to open your own business, but there are many different kinds of business formations to choose from. Which one would be right for you?
That question is loaded. There are many factors that influence the kind of business formation you should choose. For example, will you want to have employees? Would you like to keep your personal assets separate from your business assets? Do you want personal protection against liability for problems that happen on the job? Depending on your answers, you may want to choose one of several kinds of business entities that are available.
One potential option for a first-time solo contractor would be to create a limited liability company, or LLC. This is a basic business structure that protects you against liability if there is a problem with the business, has a flexible tax structure and allows you to add employees. LLCs do have some downsides, such as requiring self-employment taxes and having fewer protections than some other options, like if you were to create a corporation.
It’s a good idea to have a grasp of your personal finances, the likelihood of lawsuits or liability issues and other factors that could impact your company before you decide on the structure you’d like. Your attorney can walk you through each of the options so that you choose the entity structure that will be right for you in the long-term. Our website has more on business entities and which you may like to use.