How to Find the Best Form of Liability Protection for Your Business

MADISON, WI - December 31, 2008

In an uncertain economy, having a legal structure for your business that provides limited liability protection is more important than ever. However, choosing between the most common business structures seems daunting to many business owners.

Karen Kobelski, general manager for incorporation services leader BizFilings.com, said business owners often put off the important task of incorporating their business because they’re uncertain whether to choose a corporation or limited liability company (LLC). Given uncertainty in the economy, she said it has become more important than ever for business owners to obtain the benefits of limited liability protection - so that negative factors experienced in business don’t negatively affect a lifetime of retirement savings.

Since most businesses can thrive equally well as a C corporation, S corporation, or LLC and retain the benefits of limited liability protection, there’s no indisputably right or wrong answer -- just tradeoffs.

Ultimately, the only mistake is not using a legal structure that provides limited liability protection at all.

To choose the right legal structure for a business, Kobelski offers these five tips:

1. View a Side-by-Side Comparison

Limited Liability companies (LLCs), S corporations and C corporations are the most common legal structures small business owners consider, but it’s helpful to know the basics about all structures.

The first step in choosing the right legal structure is knowing important differences that can influence your choice. One of the best tools for comparing entities at a high level is a good side-by-side business entity comparison chart. Learning how different legal structures are managed, taxed, and organized can helps identify the entity types to consider.

2. Attend a Webinar

A good webinar on choosing a business structure describes the benefits of each legal structure you’re considering. It talks about advantages, disadvantages, taxation, and day-to-day operations. In a few minutes, you’ll gain insights that will lead you closer to choosing the right legal structure for your business.

3. Incorporation Wizard

There are a few automated tools that aid in selecting a legal structure. Among these is the Incorporation Wizard from BizFilings. Tools like the Incorporation Wizard ask you questions about how you envision the organization, day-to-day activities, and future of your business and then provide an outline of how certain business structures may meet your criteria.

4. Talk to an Accountant

After you know the basics about each structure you’re considering, talk to your accountant. Based on your plans for running, growing, and operating the business, your accountant may identify the best structure for your business from a tax perspective.

5. Talk to an Attorney

It’s best to talk to an attorney after you already know the basics about legal structures, have consulted your accountant, and have narrowed down the options. This way, you’re paying to be advised -- rather than educated. Ask their opinion on legal structure for your business based on your company’s ownership, liability, day-to-day operations, and also future goals.

It’s commonplace for accountants and CPAs to have different recommendations from an attorney, according to Kobelski. In these instances, she said the business owner needs to determine the most compelling reasons and select the legal structure that they believe is warranted.

"Ultimately, the only mistake is not using a legal structure that provides limited liability protection at all." said Kobelski.

About BizFilings

BizFilings is a full-service online incorporation service provider, offering small business owners a fast, easy and economical way to form a corporation, limited liability company (LLC) or other business structure online or by phone. BizFilings also offers a full range of business filing and compliance products, including nationwide Registered Agent service, helping keep businesses in compliance with state regulations. BizFilings can be found online at www.BizFilings.com. BizFilings is a part of Wolters Kluwer, a leading global information services and publishing company. Wolters Kluwer had 2008 annual revenues of €3.4 billion, employs approximately 20,000 people worldwide and maintains operations in over 35 countries across Europe, North America, Asia Pacific and Latin America.