What Type of Corporate Structure Best Suits My Startup's Needs?

So you want to start a business?

Your first big legal question is deciding what kind of corporate entity will best fit your needs and goals.

Because most startups are looking to scale up, a sole proprietorship or general partnership is not likely to be the best corporate form for both tax and liability purposes. In both these forms the proprietor or partner remains directly and individually liable for all the debts and other liabilites of the business.

Instead, seek other entitites like a limited liabilty corporation (LLC) or C-Corp so that you can be shielded by the corporate veil. While this shield isn't impermeable to dubious dealings, these forms will protect your personal assets from being reached by debtors. Either LLCs or C-Corps will work for most, but consulting a professional is advisible when making these decisions so that you can learn how the differences between these forms will affect your business goals.

What about S-Corps? While they provide pass-through taxation (the entity is not separately taxed) and limited liability for the owners, S-Corps may not be the best form for the startup looking to go public because it limits the number of shareholders to 100.

To learn more, please contact Nada Rastad, Esq. at SF Startup Law.