T. Randolph Catanese, Esq. © 1998
Mistake No. 4 - The Business Uses The Wrong Vehicle For Its Operations. Fortunately, in today's environment there are multiple ownership vehicles from which a business owner may select. The choice of the ownership vehicle will be dependent upon what entity makes best sense for the business operator. This is very much fact dependent and unique to each circumstance. That being said, most professional advisers would agree that a limited liability corporation makes sense for most businesses. This entity was recently recognized in the State of California. It generally allows you all the benefits of corporate ownership (protection from personal liability for corporate debts) while allowing the tax benefits of a partnership (allowing for a "pass-through" of the corporation's losses and income, thus avoiding a double taxation issue - meaning the income is taxed first at the corporation and then taxed again when the individual receives the income). For most businesses, some sort of corporate ownership is preferred. However, there will be occasions where a sole proprietorship or some other joint venture entity might also be appropriate.