Structuring Your Business

Term Paper Title	Structuring Your Business
# of Words	964
# of Pages (250 words per page double spaced)	3.86

Structuring your Business

     There are many things to consider when you are deciding on what type of structure your business will have. The majority of businesses in the U.S. are either sole proprietorships or partnerships, leaving only a small 20% as corporations. As you can see, many people feel that starting a corporation can be a very complicated project.
     When choosing the structure for your business, there are many trade-offs, advantages and disadvantages, that you should consider. This is particularly true for a C Corporation. On the American Express Small Business Services website, it states, �While incorporation requires more paperwork and expense than sole proprietorship, it does give you one critical benefit - protection from liability� (http://www6.americanexpress.com/smallbusiness/resources/starting/structuring/structure_corp.shtml).
     Limited liability is one of the main reasons that people choose to form a C Corporation. For instance, if you are part of a business with other owners �incorporating can often protect you from the actions and misdeeds of your co-owners. This is unlike a partnership, where each partner is personally liable for the business-related actions of all the partners�.  It is also unlike a sole proprietorship, where the sole proprietor is also held personally liable for paying off all debts incurred by the business. If the business can�t pay its debts, the owner will pay out of his own pocket. And even with limited liability, there are certain exceptions as noted below:

�1. It cannot protect you from your own bad acts. Being a director of a corporation does not protect you from personal liability from the wrongs you personally commit. For example: You run a package delivery service and you fill in for a driver who has called in sick. If, in the process, you run into a busload of people, you are personally liable for the damage.
2. It cannot protect you from things you personally guarantee. Banks and some
corporate creditors often require personal guarantees from people in a corporation. So if your business were to fail, you would be personally responsible for repaying these debts. In addition, you don't want to become personally liable inadvertently... so be certain your name, title, and company name are on anything you sign.
2. It cannot protect you from owing governmental trust fund taxes (withholding taxes
and sales taxes). When taxes are held in trust, all officers and anyone who has check-signing authority are jointly liable to the government for these taxes. That means that as a principal, you cannot hide behind the corporation and will be personally liable for these taxes if they are not paid.
3. It cannot protect you from some state laws. New York, for example, has a law which
says that the ten largest shareholders of a corporation are personally responsible for unpaid employee wages. ...

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