Part of establishing your investment group may include choosing a business structure type. Among the options available, you may strongly consider choosing to form as a partnership or as a limited liability company.
Understanding some of the advantages and downsides of structuring as a partnership or as an LLC may help your investment group choose the right formation type.
Structuring as a partnership
If your investment group has more than two members, you may choose to structure it as a partnership. According to the Small Business Administration, structuring as a partnership may benefit professional groups such as yours, as well as those who want to test their businesses before formally structuring. You may structure as a limited liability partnership, which protects you and other group members from debts against the partnership.
Alternatively, you may choose to structure as a limited partnership. In a limited partnership, a general partner has unlimited liability for the business’s debts, while the other partners have limited liability protection.
Structuring as an LLC
You may also consider forming an LLC for your investment group. With this structure type, you may not face corporate taxes. Rather, your group’s profits and losses pass through to your and the other members’ personal income. As a member, or owner, of an LLC, you have limited liability protection. Therefore, your personal assets remain separate from your business assets, and you may not risk losing personal property such as your home or vehicle in the event your LLC faces lawsuits or must file for bankruptcy.
Ultimately, you and the other members of your investment group must consider your current circumstances, as well as your future plans to choose the structure type most suited for your needs.