How to Decide on the Best Business Structure to Protect Your Assets

There are rewards and risks involved in building and growing your business when you’re the owner. But when it comes to the risks, there are effective ways you can protect your personal assets.

Creating a business structure to protect those assets may be the most critical step you take.

Typical business structures that usually provide the most protection from personal liability may include:

• Limited Partnership — A limited partner is typically only liable for the amount that they invested. A limited partner’s personal assets typically cannot be subjected to claims against the business.
• Limited Liability Companies — These could be limited liability companies or partnerships — also known as LLCs or LLPs. The business is responsible for its own debts and liabilities, but if the business can’t pay what it owes, the owners’ personal assets are typically protected.
• Limited Liability Limited Partnership — This entity offers some liability protection for the general partner. It is a more recent modification of the limited partnership. Slightly more than half of the states allow the formation of LLLPs.
• Corporations — S Corps and C Corps provide asset protection to the owners.

On the flip side, the two simplest forms of business structure provide the least protection: sole proprietorships and general partnerships. Also, the general partnership structure, potentially, has an even greater risk; if one partner gets into trouble, it could translate into liability for the other partners.

You can find full details about different structures and options here. It’s always best to talk over your options with your lawyer and your tax consultant (as each entity type may have different tax consequences.

If you want to explore options that make sense for your business, let us know. We’ll work with you — and put you in touch with our Avantax Planning Partners — to help you do what’s best for you and your business.

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