When it comes to starting a company, there are several different structures an entrepreneur can choose from. Many small business owners start off as independent contractors before deciding to formalize their operation. When they do register as a business, they may choose to structure it as a sole proprietorship or as an LLC. In some cases, there are advantages to choosing one type of business over the other. New Hampshire state laws are important in determining that.

A sole proprietorship means that a single person is going into business for themselves. Sometimes, they choose a new name and set up a DBA. An LLC, or limited liability company, is different. A limited liability company protects the property of its owners, so they can’t be held personally responsible for debts incurred by the company. This type of business is established according to rules set up at the state level. That means California-registered LLCs will be different from those set up in New York or New Hampshire.

In most states, LLCs can be formed by an individual, a group of people or other businesses. Even foreign interests can own LLCs in the United States. They are governed by different rules compared to domestic LLCs. For tax purposes, the IRS may classify an LLC as a disregarded entity, partnership or corporation. It all depends on how many people are a part of the company and what decisions they’ve made.

Sometimes, businesses disagree with the IRS determination. When that happens, they can file paperwork with the IRS asking to change it. All of this can be intimidating and complicated for entrepreneurs who aren’t well-versed in business law matters. When these situations arise, it may be a good idea to have an experienced business law firm explain their options.

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