If you’re opening a business, the very first thing you need to decide is how you’re going to form it. There are different kinds of business structures that provide varied benefits. Choosing your business’s structure will influence things like your taxes, day-to-day operations and even the risk to your personal assets.
Over time, you may find that the original business structure you chose no longer suits your needs. Perhaps your sole proprietorship is growing at an exponential rate and you need to hire multiple people to help you. Maybe you want to bring in a partner. If that’s the case, then it’s time to restructure your business.
When is it time to change your business’s structure?
It may be time to change your business structure if:
- You are starting to have a large customer base and business connections, so you want better protection against lawsuits and claims
- You want to bring on a partner
- You are expanding so quickly that you need to hire multiple employees
- You are interested in changing the kind of tax you pay from personal to corporate
If you started out with a sole proprietorship as many people do, then now would be a good time to consider a limited liability company (LLC), S-corporation or another form. Each of these allows you to have one or more owners, and they also allow you to protect your personal assets from your company’s liabilities. Your attorney can help you change your business structure, so you fill out all the right documents when doing so. Our site has more on the different business structures and why having the right structure matters.