One of the first decisions you will need to make when forming a business is to choose the structure. Your business structure will guide many aspects of your journey, so making the right decision is vital.
Some business structure options are straightforward, but others will require a bit more work. Understanding each business structure option will allow you to settle on the one perfect for your situation.
A sole proprietorship is the easiest and simplest business structure. It is when you own the business alone and will run it as an extension of your own finances. You won’t have separate business accounts or debts. Many companies begin with this structure and later change to another.
A partnership is the easiest option when you have two or more people. You can have a limited partnership, which is where one partner takes on the liability of the company and the others have only partial liability, or a limited liability partnership, which is where everyone has limited liability. In any case, each partner is responsible for paying taxes on their portion of the business income.
Limited liability company
An LLC is like a partnership but offers more personal protection. It makes the company its own entity, but all owners still pay their portion of taxes on the business income.
A corporation is a more formal business structure. It makes the business completely separate from the owners. The business pays its own taxes on profits and can raise money through selling stock.
Choosing the right business structure will help to get your business off on the right foot by solidifying liability and taxation issues.