Mindel Scott

Legal Definition of Structures

Unlike pass-through structures, companies are considered as separate control units. These entrepreneurs only pay taxes on the profits they actually make from the business in the form of salaries, dividends or bonuses. In addition, the corporation pays taxes at a lower tax rate than some individuals. A legal structure is an organizational framework for the operation of a business unit. Also known as a business structure, business form, or business ownership structure, the right legal structure depends on the size and nature of your business and business goals. The most common legal structures for companies are sole proprietorship, partnership, LLC (limited liability company), company, and corporation, but there are other options as well. On this page you will find the legal definition and meaning of structure, written in simple English, as well as examples of how it is used. To learn all about the different legal structures, check out our in-depth guide to legal entities and structures here. Investment needs: If your business depends on investors, a business may be the right business structure. Corporate structuring allows a company to sell ownership shares through stock offerings. Existing business structures cannot offer inventory. Typical legal structures for corporations are sole proprietorships, limited liability companies (LLCs), partnerships (such as LLPs), and corporations.

Each new company must form a business entity by choosing a legal structure under which the company will operate. In addition, business owners with these two business structures must elect senior executives who run the business and keep detailed records of all critical business decisions. In a legal context, structure refers to the conscious organization of legal elements, such as corporate governance or corporate structure. A well-thought-out business plan serves as a guide to starting and managing your business and choosing its legal structure. As you go through the steps of writing a business plan, you can see more clearly the legal structure you need for your business. However, a sole proprietorship is not considered a separate legal entity. Therefore, the owner enjoys unlimited liability protection and can be held personally liable for the company`s obligations. The legal structure, also known as the business ownership structure, determines which tax form you need to file, but more importantly, it determines how much tax you have to pay and determines your risk exposure.

Deciding between an LLC and a sole proprietorship is a difficult choice when it comes to legal structure. Many entrepreneurs start their businesses as sole proprietorships because they are easy and inexpensive to set up and maintain. All profits and losses “go” into the owner`s personal tax return, and the owner does not have to pay business tax. The different legal structures have obvious advantages and disadvantages. In most cases, the criteria you evaluate to choose the right format are: In a non-legal context, a structure is an artificial structure erected on land such as a shed, house or building. To define a legal term, enter a word or phrase below. It is important to understand each legal structure so that you can choose the one that best fits your business goals and what is most beneficial to you as a business owner. Growing companies may choose a company because they have shareholders and can issue shares. For example, many small business owners choose an LLC because it offers personal liability protection and is taxed as an intermediary unit. Owner liability: The higher the risk associated with the service or product offered by your business, the greater the owner`s liability. Traditional business plans use a standard structure and provide details on all aspects of the business.

A lean startup business plan uses the same structure, but summarizes the most important elements. A frame or construction with identifiable elements that provide stability and shape and can withstand loads and loads. As their businesses grow, many sole proprietors restructure their operations as LLCs that offer the pass-through tax benefit and limited liability protection. Corporations and LLCs provide business owners with some protection from personal liability against someone who makes claims against the business. In fact, this protection is one of the main benefits of an LLC. Conversely, owners of partnerships and sole proprietorships have little personal protection. However, you must file a regulation with your Secretary of State and pay the associated fees to form a corporation or LLC.