In today's Freedom Friday blog and email newsletter (and we are back on schedule this week!), I want to talk about a topic that I am frequently asked by business owners ready to start a new business, or if they need to restructure an existing small business, and that's how they should choose a business structure for their small business.  In other words, what business structure would be the best fit for their needs as a small business owner.  That's today's topic.  In today's Freedom Friday blog and email newsletter, I'm answering the question, “How should you choose a business structure for your small business?”

In Oklahoma, choosing a business structure is one of the most important decisions you will make as a small business owner.  This decision will determine how you receive profits, tax issues, liability issues, and much more.  A savvy business attorney can help you decide which business structure is best for your small business.  Here is a look at four (4) common business structures in Oklahoma:

1.  Sole Proprietorship

The first common business structure in Oklahoma is the sole proprietorship, which is the default structure if it's just you (there are no co-owners or partners), and you do not file anything with the Oklahoma Secretary of State, unless you file a DBA.  Even a DBA can be a sole proprietorship if it is filed as a trade name for your personal name.  In a sole proprietorship, you personally receive all the revenue generated from the business, without having to pay yourself a salary or a dividend.  However, a major disadvantage to a sole proprietorship is that as the owner, you assume all the liability for the business.  If there is a contract dispute, or a problem with a product, then your client or vendors can sue you personally, placing your personal assets at risk.  You will also have to use your own personal credit to obtain a loan for your business.

2.  Partnership

The second common business structure in Oklahoma is the partnership, which is also the default structure if it's you and you have at least one co-owner or partner, but you do not file any thing with the Oklahoma Secretary of State, unless you file a DBA.  However, if you want to enter into a partnership, you really need to have a written partnership agreement that explains the rights and responsibility of the partners, how the profits will be shared, how the liabilities will be handled, how decisions will be made, etc.  There is more than one type of partnership, and a savvy business attorney can help you choose which one is best for your business.  Your attorney will also help you make decisions regarding exit strategies and how to handle the death of a partner.

3.  Corporation

The third common business structure in Oklahoma is the corporation.  You don't need to be a large business to create a corporation; some small business owners choose to be a sole shareholder corporation, as well.  A corporation offers several benefits, including limited liability, creating a clear separation between owners and management, and allowing an unlimited number of shareholders.  There are also disadvantages, including the fact that this structure can become very complex, and it can involve higher taxation.  You can ask the IRS to treat your corporation as an S-corporation to resolve “double taxation” issues, but there are limitations on doing so, and all corporations are less flexible in allocating income for tax purposes.

4.  Limited Liability Company (LLC)

The fourth and perhaps most popular business structure in Oklahoma is the limited liability company (LLC).  The LLC is designed to limit the liability of a company and its owners.  An LLC also helps you to protect your personal assets in case of a lawsuit or other legal issues, and an LLC has tax benefits as it can reduce “double taxation” for owners under certain circumstances.   There is also flexibility in an LLC for the number of membership interests.  The only significant disadvantages can be the cost of setting up an LLC, maintaining it, and restructuring it as time goes by.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/