Congratulations, you want to start a new business and have great ideas and financial backing. You’re ready to get started, but have you thought about protecting yourself financially from liability, taxes, and other perils or contingencies that a proper business organization can help you with? First, let’s briefly identify the types of businesses you can form and the benefits of each.Sole Proprietorship
The easiest and most common form of business to establish is the sole proprietorship. This is suitable for people who solely own and control most or all the assets of the business and agree to manage and operate the business. In exchange for the benefits of full ownership and retention of profits, they will also open themselves up to full personal liability for all debts and obligations that the business incurs.General Partnership
To form a general partnership, two or more people must decide to open a business together and share the profits. General partners owe each other the duty of trust and loyalty and must put the partnership above their own interests. The creation and character of the partnership is similar in many ways to a sole proprietorship because no state filing or ongoing state or franchise fees are required. Unlike a corporation, no annual meetings or partnership interests are required, and you will not have to keep business assets separate from the partner's personal assets.Limited Partnership
Although somewhat resembling a general partnership, a limited partnership consists of one or more general partners, as well as one or more limited partners. The general partners are fully liable for the obligations and debts of the business. The only risk limited partners have is the loss of their capital investment, which they make with the hope that they will earn a good return if the business is successful. Limited partners can’t manage the business or they could become liable for business debts just like a general partner.Limited Liability Company (LLC)
An LLC is a unique combination of the taxation rules and flexibility of a general partnership, but with the limited liability protection that comes with a limited partnership or corporation. The big appeal to this form of entity is that an LLC has much greater flexibility in conducting business than a Limited Partnership, a Subchapter C Corporation, or a Subchapter S Corporation.Corporation
Most people recognize the “Inc.” at the end of many large business names, and a Corporation is one of the most significant forms of business to help the entity grow and prosper. It enables them to raise funds and capital because investors can become owners without being responsible or liable for the obligations or management of the business. This is a big enticement when the business seeks additional capital. However, it is one of the most complicated entities to establish and maintain, but with the further advantage of possible tax savings. Articles of incorporation must be filed, and a board of directors, managers, and shareholders are necessary to proceed with the corporation.
This is a brief overview of the available business organizations, but you will need an experienced business attorney to advise you and prepare the necessary documents to establish the entity that is just right for your business. Contact the experienced business law attorneys at T.R. Spencer Law Office at 801-566-1884 to get your business on the right track.