Last week we discussed what type of child care center you want to be philosophically. We discussed selecting a mission statement to help you find a course to business satisfaction by staying true to your core values and beliefs. This week we begin a two part segment on selecting the type of legal structure for your business. This is an important decision because choosing a business structure can determine how much taxes you will pay, what type of investors you can have, how you pay yourself, what legal protections you will have to shelter your family and business assets and finally your ability to sell your business if you choose.
Most small child care centers are sole proprietorships which is the simplest form of business ownership. The benefits are that it is extremely easy to start and manage. This form of business is most effective when only one person owns the business.
Partnerships are similar to sole proprietorships in that more than one person is the owner but the business runs similar to the sole proprietor. Again very easy to start and run however a little more difficult to manage as legally the partnership is very similar to a marriage. You need to know and trust your partner really well to enter into this form of business because you are obligated for each other’s decisions and actions.
Limited Liability Companies (LLC’s) are a hybrid of the sole proprietorship with protections of a corporation. The owner or owners are called members. The rules and laws for LLC’s are different in each state so before you consider starting one be sure to do your research.
A corporation is perhaps the most well known form of business structure used to protect the assets of their shareholders. Corporations, particularly (S) corporations are effective ways to keep business and personal funds separate and limiting your liability in the event of a serious legal problem. Corporations are the most complicated of the legal structures but also the most effective when you are working with multiple owners and/or investors or a large business or a business that is growing rapidly.
There are other specialty forms of business that we will not discuss here and there are no one type of structure that is better than the other. Next week we will discuss more in depth the forms of business structures that we listed and where to go for more information.
For immediate information call Chris at 805-238-1818.