One of the first things to do when starting your wedding planning business is to determine your legal business structure. The options are sole proprietorship, partnership, limited liability partnership, and corporation. Below I briefly explain what they consist of along with some of the advantages and disadvantages of each one. You should consult your attorney or accountant before deciding what is right for you.
You are the sole owner of your wedding planning business. It does not mean that you cannot have someone working for you, it means that you are the sole owner and do not inform anyone. This is how most wedding planners start because it is the easiest and cheapest way to start a business. There are very few filings and registrations and few administrative issues. You can declare your business on your personal tax return, which is an advantage for many people. A disadvantage of this form of business is the fact that you are personally liable for the debts your business incurs.
If you and another wedding planner, florist, caterer, or any other wedding provider decide to start a wedding planning business together, you can co-own and form a partnership. You must be clear about each of your responsibilities and must be equally committed to the business. All of you will be personally responsible for the obligations and debts incurred by the company. If you want to have a partnership, hire a lawyer to work out a legal agreement, even if it is with close family or friends. If you have the slightest feeling that something could go wrong with the partnership, don’t do it.
Limited liability company
You would enter this type of partnership with the help of a lawyer. It allows someone to invest in your wedding planning business and limits your liability to the amount of your investment. They do not participate in the management of the business, that is left in the hands of the general partners. Any assets of the general partners can be used to pay the debts owed to the 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 company debts. Each state has its own rules regarding LLCs, so if you want to know more, talk to 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. Incorporation protects you from personal liability, but there are many rules and costs involved in owning a corporation. Consult with your attorney and accountant to find out what it would take to establish and run a corporation in your state.