Choose the right legal structure for your business.
There are several factors to consider.
One of the most important factors is limited liability. Certain structures, such as sole proprietorships, doe not offer any liability protection. Owners of these businesses have full personal liability for their business debts.
Other factors to consider include the following:
- Number of owners
- Types of owners
- Taxation considerations
- How the business will be capitalized
- Whether the business will go public
- What, if any, fundraising will the business do
- Initial start-up expenses
- Whether the business solicit additional owners
- The management structure of the company
- Importance of using certain employee benefit plans
- The purpose of the business
Typical business structures include the following:
- Limited liability company
- General partnership
- Limited partnership
- Sole proprietorship
In the majority of cases, a limited liability company (LLC) offers a great balance of these factors, including limited liability, multiple taxation option and considerable flexibility in structuring the specific desires of the owners.
If you are not sure which entity structure is best for you, it is a good idea to consult with an experienced business attorney and an experienced tax advisor.