Being an interior designer requires a lot of learning and years of experience along with constant failures. However, one who does not give up and keeps striving for success surely achieves their goals in the longer run. Many interior designers aim to establish their own businesses in this industry.
You have to choose the ideal legal structure for the company. However, the legal structure would have different aspects from filing taxes to the overall percentage of liability you might have.
Opting for the right legal structure for your interior design business is a tough ask. Before reaching a final decision, you must make sure that you consult a well-reputed accounting firm, or a legal professional to assist you regarding the tax and other legal implications.
The final legal structure would depend on your business goals, risk tolerance, and other such factors. Plus, if you dedicate time to consider the available options, you can turn the odds of success in your favour.
The Different Legal Structures
Many people often struggle with complicated legal structures and choices. They do not have the expertise of such legal aspects. To help you make an informed decision, we have highlighted some of the many legal structures and explained them so the final decision becomes easier for you.
Sole Proprietorship
The sole proprietorship is undoubtedly the simplest legal structure for different small businesses. You would have complete control over the profits and the losses of your business. Also, you would be liable for all of its debts and liabilities. Business income and tax expenses would be reported via your personal tax returns.
Furthermore, a sole proprietorship would not offer any protection against personal liability. If your business sees the face of the court, or if you are unable to pay your debts, then your personal assets might be at risk.
Partnership
You can also plan to bring some partners on board in your interior design business. Within a partnership, all partners share the profits according to whatever set ratio or percentage in the memorandum. Moreover, individual partners would be liable for both the debts and the obligations of the business. Partnerships can be further categorized into general partnerships and limited partnerships.
Limited Liability Company
Limited Liability Companies are a popular choice for smaller companies as they combine the simplicity, flexibility, and liability protection of a sole proprietorship with the liability protection of a corporation. You might just not be personally liable for all the debts and the obligations of the business under a limited liability company.
The entirety of your personal assets is protected if the business ends up getting sued or is unable to pay its debts. Taxation is also lenient as you have the option of deciding whether you want to be taxed as a sole proprietorship, a partnership, or others.
Corporation
A corporation can be defined as being a separate legal entity, independent from its owners as it is able to own assets and have bank accounts in its name. Corporations are subject to complex regulations and formalities in comparison to other structures. There is also a possibility for owners of a corporation to face double taxation.
Conclusion
Choosing the right legal structure for your interior design business is a decision that should be made with careful consideration. It can set the tone for your business and can also be a key part of the future. Take the time to research and understand the implications of each structure before making a decision that will set the foundation for your business’s success.