Deciding on the best business structure for your business is an important part of any business formation process. Each business form has potential benefits to consider and, additionally, drawbacks may also be associated with a particular business form based on the business. When considering business formation, business owners should be familiar with the options.
There are several different types of business forms. When evaluating the different types of business forms , and which is best for the business owner’s business, the business owner should consider liability and taxation concerns, as well as others. A sole proprietorship is the most basic business form which allows for the business owner to be taxed for the business on their personal taxes and is also the simplest and least costly business form to operate; it also provides the most control for the business owner, however, it also provides no protection from personal liability.
A partnership is another type of business form which is usually governed by a partnership agreement. The partners will also be taxed on their personal tax returns and the partners will be personally liable for any liabilities of the business. The partnership agreement will usually specify how business decisions will be made. A corporation is another common business form which provides protection from personal liability but is usually considered double taxed because the owners will be personally taxed, as well as the corporation incurring its own tax liability. Corporations are typically also the most costly business form to run and allow for the least amount of control over the business. A limited liability company, a fourth option, allows business owners to enjoy the benefits of limited personal liability without double taxation.
Deciding what is the best business form for a business as it starts up and grows into the future is not a decision that should be taken lightly. Understanding legal resources during the business formation process can help business owners get going and start their business off on the right foot for success.
