When starting an event planning business, one of the first big decisions is choosing how to structure your company. From sole proprietorships to partnerships and LLCs, you have options. But event business structures involve more than just a formal registration.
The structure you pick shapes everything from day-to-day management to taxes, liability protection, and more. For event planners, the stakes are high to get this right from the start. Choosing the wrong structure can hamstring growth or leave you and your personal assets exposed.
With so many models to evaluate, the path forward might seem confusing. But understanding the core differences between structures helps simplify an otherwise complex decision.
Comparing Business Entity Types
When starting an event planning business, most owners opt for either a sole proprietorship, partnership, limited liability company (LLC), or S corporation structure. Each model has pros and cons to weigh based on your goals and risk tolerance.
Sole Proprietorships
Sole proprietorships offer the easiest route to get up and running quickly. You can instantly create one by default when operating a business alone under your own personal name.
With a sole proprietorship, you retain complete control over all decisions big and small. You also benefit from pass-through taxation where business income and losses flow directly to your personal tax return.
However, the flipside is unlimited personal liability. With no legal separation between you and your business, creditors can pursue your house, car, or other assets to settle company debts.
Partnerships
General partnerships emerge whenever two or more co-owners decide to operate a shared business together. Partnerships allow you to combine resources with others to grow the business faster. They also provide flexibility in structuring ownership stakes and management roles between partners.
On taxes, partnerships retain pass-through treatment where income passes directly to owners' personal returns based on their share of ownership. However, similar to sole proprietorships,
partnerships offer no liability shield to protect personal assets from business debts and legal issues. All partners also take on joint responsibility for the actions of the other partners. So improper actions by one partner could financially impact everyone involved.
Limited Liability Companies
For many small business owners, limited liability companies (LLCs) offer the best of both worlds. LLCs blend elements of partnerships, corporations and S corporations into a flexible structure suitable for event planners focused on managing liability risk.
Specifically, LLCs create a legal separation between the company and owners. This protects personal assets from seizure to settle business debts. LLCs also come with fewer formalities and paperwork than corporations while allowing for customized management and ownership.
S Corporations
S corporations represent another option combining liability protection with pass-through taxation. Similar to LLCs, S corps create a legal separation between the business and owners. So creditors can't pursue owners' personal assets to pay company debts.
However, S corps come with more rigid rules. For example, S corps can only have one class of stock and no more than 100 shareholders. Restrictions also exist around eligible shareholders.
S corps do enable owners to take tax deductions for some fringe benefits not available to LLC members. But on the flip side, state fees and paperwork burdens may be higher for S corporations compared to LLCs.
Factors Influencing the Ideal Structure
With an overview of the core models, how do you choose the right one for your event planning business? Key factors to consider include:
Business Goals and Growth Plans
If you hope to rapidly expand by bringing in investors, a corporation may better support funding efforts compared to alternatives.
Number of Owners
If co-owners are involved now or in the future, LLCs and S corps have more flexibility for shared ownership than sole proprietorships.
Tax Implications
The pass-through design of partnerships, LLCs and S corps avoids double taxation of income.
State Regulations
Requirements around licenses, fees and paperwork vary by state for LLCs and corporations. Factor these costs into your decision.
Liability Risks
If managing liability is crucial, lean towards an LLC or S corp structure to protect personal assets.
Structuring Your Event Planning Business
Once you select an ideal structure, next steps include:
Filing Paperwork
Formally register your business by filing formation documents with state regulators.
Obtaining Licenses and Permits
Research if you need to apply for local business licenses based on location and type of event services offered.
Setting Up Accounting and Payroll
Establish processes to track income and expenses. If hiring staff, implement payroll systems accordingly.
The right business structure provides a backbone for pursuing growth plans as an event planning professional. While the landscape of options might initially seem complex, taking the time to understand models like sole proprietorships, partnerships, LLCs and S corporations allows you to make an informed, empowering decision for your business' future.