One of the first things you need to do when you start your wedding planning business is determine your legal business structure. The choices are sole proprietorship, partnership, Limited Liability Company and corporation. Here I briefly explain what they are along with some of the advantages and disadvantages of each one. You must consult your attorney or accountant before you decide what is right for you.
You are the sole owner of your wedding planning business. It doesn’t mean you can’t have someone working for you, it means you are the only owner and you don’t report to anyone. This is how most wedding planners start because it is the easiest and the least expensive way to begin a business. There are very few filings and registrations and few administrative issues. You can report your business on your personal tax return, which is an advantage to many people. A disadvantage of this form of business is the fact that you are personally liable for debts your business incurs.
If you and another planner, florist, caterer, or any other wedding vendor decide to start a wedding planning business together, you can be co-owners and form a partnership. You should be clear about each of your responsibilities and should be equally committed to the business. All of you will be personally liable for the obligations and debts the business incurs. If you want to have a partnership, hire an attorney to draw up a legal agreement, even if it is with family members or close friends. If you have the slightest feeling that something could go wrong in the partnership, don’t do it.
You would enter this type of partnership with the help of an attorney. It allows someone to invest in your wedding planning business and limits their liability to the amount of their investment. They are not involved in managing the business, that is left to the general partners. Any assets of general partners can be used to payback debts owed to limited partners.
Limited Liability Company
This business structure combines the tax advantages of a partnership with the liability protection of a corporation. LLCs are owned by members, and members are not personally liable for the debts of the company. Every state has its own rules regarding LLCs so if you want to know more, speak with your attorney.
You can form a corporation whether you are alone or have business partners. Being a corporation makes you appear more professional to potential clients and other wedding vendors. Incorporating protects you from personal liability but there are many rules and costs involved in having a corporation. Check with your attorney and accountant to find out what it would take to setup and run a corporation in your state.