Idaho Business Law: The Different Entities You Can Choose From for Your Business
By Lane V. Erickson, Idaho Business Attorney
Starting a business can be a daunting task. There are so many things to think about and so many decisions to be made. One of the most important decisions you can make is how you are going to structure your business.
These kinds of decisions are not limited to when you start your business. Even if you have a business that is operating right now, you are not necessarily stuck with how you started running it. In other words, if you choose, you can change the basic structure of your business just about any time you want.
How you structure your business is important because it will affect many different things. This could include how you determine and pay federal and state taxes. It could also include how your business is managed. Additionally, the way you structure your business can have an impact on whether the owners of the business are protected from the liability of the business. Structure of your business also has an impact on determining the actual ownership interest of the business.
If these things are making your head spin, do not worry. The good news is the premier business attorneys at the Racine Law Office can help! We help clients structure and set up their businesses or change the structure of their businesses for more than 70 years. Our team of talented business lawyers have the experience, knowledge, and skill necessary to answer your questions and help you with all your business needs. We encourage you to contact us for a free 30-minute consultation where we can answer your questions and help you decide what the best structure for your business would be.
To help you get started, the purpose of this article is to summarize some of the basic options that a person can choose from when it comes to structuring their business in Idaho. There are several options. Each of these options has pros and cons that should be considered before a decision is made.Sole Proprietor
The first structuring option is operating your business as a sole proprietor. This is an option that can be used whenever you are the only owner of the business and you choose not to create any formal structure for your business. In other words, your business is just you. The word “sole” means just one and the word “proprietor” means business owner. In other words, this name means you are the only business owner.
Many people who decide to begin a business operate as a sole proprietor whether they know they are doing it or not. If they simply begin operating the business and they don’t create any formal structure such as the business entities that are described below, that means they are operating as a sole proprietor.
The good thing about acting as a sole proprietor is that you are in complete control of the business. Additionally, there is no structuring, so the process is simple. You just operate the business and any income or profits that are received are yours. The bad thing about this type of business structure is that it does not offer any protection to the business owner. In other words, if the business gets a loan so that it can operate, the loan is being made to the individual and not necessarily to the business. Additionally, if any customers or clients are injured on the business premises, the individual owner is personally responsible for those injuries. There simply is no protection for the business owner from any liability that arises.
Many people operate their businesses as sole Proprietors. There is nothing wrong with this if this is what you choose to do. However, if you are operating as a sole proprietor simply because you didn’t know that there were other options to choose from, then we suggest that you review the options below and decide which would be best for you and your business.Partnership
A partnership, by legal definition, is when two or more people agree to operate a business together as joint owners, and to share in any profits or losses of the business. There are many different types and kinds of partnerships that can exist. There are general partnerships, limited partnerships, and limited liability partnerships. Each of these are different and provide a specific business structure for the owners of the business.
A partnership is usually controlled by a partnership agreement which spells out first what type of partnership the business is, and second who the partners of the partnership are. This agreement also usually outlines how the business will be operated, and how disputes or differences of opinion will be resolved between the partners.
Depending on the type of partnership that is created an individual partner may or may not be protected from the liabilities of the business operation. Again, this would all be controlled by the partnership agreement itself.Limited Liability Company (LLC)
The next business entity choice is the limited liability company or LLC. This is a fairly new business entity choice that has only existed for about 30 years. It essentially takes all the good things that apply to a partnership and to a regular corporation and creates a hybrid between the two.
An LLC is the business entity we most often recommend for new business owners. The reason for this is that it has some flexibility in how it is operated. Additionally, it is also controlled by an agreement like a partnership, but it provides all the same corporate protections that a regular corporation offers to its owners. It is like having your cake and eating it too.Corporation
Finally, a regular corporation is also an option. This business entity seems to work well for businesses that intend to grow and become quite large. It is also the best entity choice if you believe that your company may offer shares of the corporation to the public on a general trading or investing Market.
A corporation is not necessarily nimble and how it operates but it does provide protection to the board of directors, the officers, and the shareholders or owners of the company. The documents that are used to create and control a corporation are similar to but different from those that are used in any of the other entities listen above. Additionally, Idaho statutes play a big role in regulating how a corporation is operated in Idaho.
As you can see, there are many options and choices when it comes to starting or operating a business in Idaho. If you have questions or concerns about which entity might be best for you and your business, we can help. We have assisted numerous clients in creating and operating their business structure in Idaho. With our experience and skill, we are confident that we can help you too!Enlist an Idaho Business Attorney to Help You
Our team of Idaho business lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial free 30-minute consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a free consultation. You can also email us directly at firstname.lastname@example.org or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.