How do I structure this mess?

  By Jeremy Wilch, J.D., SBDC Business Counselor - Region IV

The proper business structure for your business is a unique choice you are best suited to make.

Many aspiring entrepreneurs are concerned about the proper legal structure for their business. First, let’s review some of the business structure options available in Wyoming. Generally there are five options; sole-proprietorship, limited liability company, limited liability partnership, partnership, and corporation. Each structure provides its own unique benefits and drawbacks, which we will review briefly.

Sole-proprietorship is by far the most common business structure. The benefit of a sole-proprietorship is it requires no formal paperwork to be filed with the Secretary of State’s Office [the official business regulation office for the state of Wyoming]. This option is quick-and-easy, requiring no paperwork or fees. Unfortunately, sole-proprietors enjoy no protection from business liability. In the eyes of the law the sole-proprietor’s business and personal assets are indistinguishable. We’ll review why this is important below.

Limited liability companies [for individual or multiple owners] and limited liability partnerships [for two or more people operating as partners] are becoming very popular as a business structure.  The primary benefit of an LLC/LLP is the assets of the business are kept legally separate from the assets of the owner(s). This is a tremendous benefit to the business owner as it provides a “corporation-like” protection of the owner’s assets in the event of lawsuit or legal judgment. The drawback to this type of structure is it requires application/filing with the Secretary of State, annual reporting, and the associated fees.

The final two common business structures – partnerships and corporations – have very unique duties and benefits which are defined by law. The filing requirements of each structure are complicated and mistakes can negate the protections they are designed to provide. For this reason, it is highly recommended businesses considering these structures consult a Small Business Development Center counselor, an attorney, and/or an accountant for guidance.  Generally, these structures provide little additional benefit to the average small business.

The nature of your business, number of employees, value of assets, and other business traits will ultimately determine which business structure is best for you and your business. I encourage you to visit http://soswy.state.wy.us/corporat/corporat.htm or contact an SBDC counselor for additional information on each of these structures; go to http://www.wyomingentrepreneur.biz and click on free consultation.