When you start a business, one thing is true: There is a risk that someone could file a lawsuit against you. It might be a customer who is angry about an order or a third-party contractor who wasn’t happy with a contract. Regardless of who it is, the reality is that you could be the one who faces trouble.

The risk of a lawsuit is why it’s so important to choose the right kind of entity structure. The choice you make determines much about your business, from how you pay taxes to who is held liable in the case of a lawsuit. You have multiple choices, so it can be confusing.

Some of the possible business forms you might want to choose include:

  • Sole proprietorships
  • Partnerships
  • Chapter C corporations
  • Subchapter S corporations
  • Limited liability corporations

Each of these has its own benefits and downsides, so it’s necessary to think about things like how you will pay your taxes, how you want to protect your assets and if you are happy with being personally liable for anything that goes wrong with your business. You need the right education, because choosing the wrong business form could lead to taxation issues, problems with liability or other negative consequences down the road.

If you are just starting your business and don’t know much about these different business forms, it may be a good idea to speak with your attorney about them before you choose. With the right business structure, you can shield your personal assets against claims that come against your company. Our site has more information to help you understand the kinds of business entities and why you may want to choose one over the other.

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