Choosing a Business Structure: What You Need to Know About Your Six Main Options
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No matter what type of business you plan to start, it’s important to understand the legal and financial requirements before you make your first moves. You may be able to begin without filing paperwork for licenses or permits, even though it’s not, strictly speaking, legal. But if you have any kind of success, you’ll need to get legal at some point, so you need to have a firm grasp of what “legal” means.
One caveat: Although you can apply for licenses and permits on your own, it’s smart, and probably less expensive in the long run, to hire a lawyer or an accountant to help with the structure or financial management of your business.
Most state governments provide a number of ways in which your business can be organized. Each has certain advantages and disadvantages. Some have to do with how much tax you pay and how you pay it. Some have to do with who controls the business, who’s accountable to whom, and how. And some relate to specific issues like succession, liability, or capital structure.
However you start your business, one of the first major decisions you must make is how to structure it. Generally, there are six alternatives:
sole proprietorshipgeneral partnershiplimited partnershipclosed (Subchapter S) corporationopen corporationlimited liability company
The simplest form of business, a sole proprietorship, doesn’t have much structure. A large percentage of sole proprie…IBPA Members – Click here to view the full article (login required).
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