It's incredibly important to start your business off on the right foot. Forming your new business around the wrong structure could cost you. Do you know which kind of business entity is best for you?
How do you pick a business entity?
Your first business decisions might be the most important. You might choose to seek out a business and financial adviser for expert advice. Groups such as Service Corps of Retired Executives (SCORE), attorneys or accountants can help you at your price range.
You will need to structure your business around your priorities and needs. The most important are your tax situation, your abilities to keep accurate and thorough records and your liability concerns. If you will be doing your own bookkeeping, for example, your future needs will be very different than if not.
What kinds of business entities are available?
Most start-ups fall under the following structures:
- Sole proprietorship: Under this structure, you maintain nearly complete control over the business. You are personally liable for all financing decisions.
- Partnership: If you and another person want to share the profits and liability of a business, you may want to choose this option.
- Limited Liability Company: You and other owners do not hold personal liability. You receive the benefits of both a corporation and a partnership.
- Corporation: You create this separate entity that is taxed and held legally liable as a business. It requires advanced bookkeeping and operates at a higher cost.
Whichever you decide, be sure that your business follows all federal and state laws. If you would like to ensure that your business can withstand pressures now and adapt to future needs, you may want to seek specialized assistance.