Learning the Legal Stuff

February 13, 2021

This week I researched and learned all about the legal mumbo jumbo. I learned more about corporations, partnerships, LLCs, and sole proprietorships. I also learned about sales tax, when it is required and when it is not. 

I'm not going to really focus on the tax part. It varies too much from location to location, and product to product.

However, the basics of what needs to be known before choosing a business formation is simple. The advantage to a sole proprietorship over all is that they are easier to set up. The disadvantage is the liability. All the other business formation types separate business and personal. That means the debt stays with the company, not you. It also means if someone sues you, they can only attack the company, not you and your personal assets. So, if your company has more than a very low liability risk, form something other than a sole proprietorship. 

One more quick note, if you are going to form a corporation, make it a s-corporation. A c-corporation gets taxed on the company level, and a personal level, also referred to as double taxation. A s-corporation transfers its tax to the personal level, and you only pay once. That is also the case with partnerships and LLCs.