As an upcoming North Carolina business owner, one of the most crucial decisions you must make is how you want to structure your company. This is dependent on several factors such as how you want you want to get taxed, how many owners there are and how much liability you think each owner should have when it comes to legal issues.
While there are several ways to structure your business, new owners should consider starting a limited liability company (LLC). This entity offers a level of flexibility few other structures can offer for newcomers when it comes to taxes and liability. Aspiring entrepreneurs should know what benefits are available from this structure as they are considering their options.
Owners have several ways (https://www.nc.gov/services/starting-business-nc/business-registration/choosing-business-structure) to structure their taxes no matter how many members of the company there are. If the business has more than one owner, then they can get partnership taxes unless they prefer to receive taxes as a corporation. Even if it is just one owner, they can still choose to get taxed as a corporation instead of a sole proprietor.
Additionally, LLCs offer North Carolina business owners special tax treatment that may help them avoid “double taxation” on their income. They are a flow-through entity, meaning that they can include business income on their personal income rather than have them separate. Not only does it simplify the process, but the Tax Cuts and Jobs Act of 2017 aims to greatly reduce the amount of taxes flow-through businesses receive.
As the name suggests, limited liability companies can also reduce the amount of liability each major member of the company has. Your business is legally separate from you, so you do not have to worry about any legal issues or debt affecting your personal assets directly.
This is especially helpful if you create this business with someone else, as it can protect you from taking full liability for a devastating mistake that your partner or any employee could make. If not, you could risk losing thousands of dollars in a lawsuit for something that wasn’t your fault.
The amount of options North Carolina entrepreneurs can get with an LLC can occasionally feel overwhelming. While it is refreshing not having so many restrictions on your business model, it is also difficult to decide certain aspects such as what tax method you will use. Those setting up a new business in the Old North State should consider contacting a business law attorney to help them get a good start.