Starting up a business can sometimes feel like a leap of faith, however, the business law legal system provides important tools and resources to help new business owners and entrepreneurs select the best business form for their goals and needs. It is important to be familiar with business formation and planning and options available to help get the business going but also to accommodate its future growth down the road.
Selecting a business form is a big decision and determines control of the business; paperwork obligations of the business which also determine cost; taxation; the ability of the business to raise capital; how the business might end; and the personal liability of the business owner or those involved in the business; and other concerns as well. These are all important considerations that should not be taken lightly when an entrepreneur is starting up their business.
A sole proprietorship is the simplest business form which provides the most control for the business owner over the business but also provides the most liability for the business owner. A partnership is another business form to consider which provides the advantage of pass through taxation but does not provide personal liability protection for the partners. A corporation, on the other hand, provides liability protection for those involved in the corporation but it is oftentimes considered double taxed and can be costly to run and operate. A limited liability company is a good option to consider because it provides pass through taxation but also provides protection from liability for the business owner.
Selecting a business form is a big step that can sometimes feel as big as starting the business. It should not be taken lightly and should be carefully considered but the legal process provides many resources to help get new business owners headed in the right direction.