One of the first things you need to do when starting a wedding planning business is to determine the legal structure of your business. The options are sole proprietorship, partnership, Limited Liability Company and corporation. Here I briefly explain what it is and some of the advantages and disadvantages of each. You should consult with your attorney or accountant before deciding what is right for you.
Sole Proprietorship
You are the sole owner of your wedding planning business. That doesn’t mean you can’t have someone work for you, it just means you are the sole owner and you don’t report to anyone. This is how most wedding planners get started because it is the easiest and least expensive way to start a business. There are very few filings and registrations and very few administrative issues. You can report your business on your personal tax return, which is a boon for many. The disadvantage of this form of business is the fact that you are personally liable for the debts arising from your business.
General partnership
If you and another wedding planner, florist, caterer, or other wedding vendor decide to start a wedding planning business together, you can become co-owners and form a partnership. You must be clear about each of your responsibilities and must be equally committed to the business. You will all be personally responsible for the obligations and debts the business incurs. If you’re looking to enter into a partnership, hire an attorney to make a legal agreement, even if it’s with a family member or close friend. If you have the slightest feeling that something is wrong in the partnership, don’t do it.
Limited Guild
You will enter into this type of partnership with the help of an attorney. This 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, which is left to the general partners. Any assets of the general partner can be used to repay the debt to the limited partner.
Limited liability company
This business structure combines the tax advantages of the partnership with the liability protection of the company. LLC’s are owned by members, and members are not personally liable for the debts of the company. Each state has its own rules regarding LLCs, so if you want to know more, talk to your attorney.
Company
You can form a corporation whether you are on your own or have business partners. Becoming a corporation makes you appear more professional in front of potential clients and other wedding vendors. Incorporating protects you from personal liability but there are many rules and costs involved in owning a company. Check with your attorney and accountant to find out what it takes to set up and run a company in your state.