Choosing the Right Organizational Structure

From LLC to “S” Corps and “C” Corps, there is a mind-boggling array of alphabet soups that can make choosing an organizational structure overwhelming. Here are some guidelines for startups.

  • Focus on the operational. As a startup, select a structure that allows for the most flexibility and the least restrictions in the day to day operations of the business. It is vital that you have the freedom to respond and adapt to the demands and requirements of your business.
  • Buy insurance to minimize risk. This is related to the first guideline. Don’t base your choice of an organizational structure simply to shield assets. Most new businesses don’t conduct the volume of activity to incur huge risk in the first two years. A better strategy is to purchase general liability and/or professional insurance rather than to get bogged down in an organizational structure that will require your time and resources.
  • Decrease the likelihood of getting into trouble. Having to keep abreast of ever changing statutory and regulatory requirements and ensuring that your business is in compliance diverts time from building your business and can also result in costly fines and violations at both the state and federal level. If you need to hire professionals to handle this function, doing so will add to your costs and overhead.
  • Maintain control over financial matters. It is vital that small business owners have the ability to move personal and business resources as they see fit. The ideal structure should also give you the option of filing your business results on your personal tax return.