4. Starting a business? What type of business structure do you choose?

Before we begin explaining the different types of business structures to choose for your own business, understand that you will need to conduct your own research to determine what is best for you, the business owner, and for your business.

So what is Media Arts planning on listing themselves as? A Partnership? An S-Corporation? How about a Sole Proprietorship? No, no, and no. From the research we conducted, we have determined that a LLC, or a Limited Liability Corporation, is best for our business.

So what is a LLC and why did we choose this over everything else?

In short, a LLC provides protection for owners of a business. A LLC prevents individuals from suing the business owner from personal liabilities of both debts and damages, but instead puts the liability on the business. Furthermore, as a LLC business, we would have the flexibility to choose the way we are taxed: either once a year like a sole proprietorship/partnership, or twice a year like corporations.

So why is a LLC more beneficial over a partnership or sole proprietorship?

Like mention earlier if we conducted business with either an individual or a group of people and the agreed upon work is not met to the word of the contract, the individual or group of people can sue for damages. If we were structured as a Partnership or Sole Proprietorship, those people(s) can sue the business people and potentially take their personal belongings, such as homes, cars, etc., because they assume unlimited liability.

However, at the same time there are benefits to a sole proprietorship/ partnership over corporations. The main benefits are personal income, single-round taxes, and unfettered control/50/50 control of the business.

Why did we choose a LLC over other types of Corporations, like S-Corp or C-Corp?

Ideally, Media Arts plans on becoming a really big business, that also incorporates a University of some sort. With that, S-Corp and C-Corps are not good for us at the moment. They are typically reserved for larger companies (but not all the time). However, one thing about these corporations is that both bylaws and appointment of board of directors is necessary, meaning that you need to hire more people (hence why it is usually reserved more for larger companies).

Where Media Arts is at currently, we do not have the resources to hire additional personnel, preventing us from becoming a S-Corp or C-Corp. However, at the same time we do not have a need to become a S-Corp or C-Corp and would rather have the flexibility on taxes with a LLC if we have a slow year.

Lastly, understand that there are more business structures available that the ones listed are just a few to choose from. There are Limited Liability Partnerships, Benefit Corporations, Nonprofit Organizations, and Joint Ventures. Make sure to do your due diligence on what is best for you and your business.

Best of luck!

— Christian Allan Ramirez