One of the first decisions you have to make when you’re starting a business is what type of business structure you will use. This is important because it sets the standards for personal and business protection. It also determines what type of tax liability the company will have.
There are several options to choose from, but the circumstances you’re facing dictate which are the most appropriate. If you’re the only owner of the business, you might consider a sole proprietorship. This choice doesn’t provide you with any division between your personal finances and the finances of the business, however. Therefore, it isn’t usually appropriate for people who engage in financially risky businesses.
You do have the option of a limited liability company, or LLC. This places a dividing line between your business liabilities and your personal assets. Having this division is a good choice for those who have a mid- or high-risk business. It is also possible for an LLC to be established by more than one owner.
Partnerships are options if you’re going into business with one or more other people. There are several types of partnerships. The one that you select depends on the roles of the partners and the liability that each is assigned. The two most common are the limited partnership and the limited liability partnership.
Other types of business structures are also possible, but they are much more intensive and detailed than those above. Understanding the specifics of each one can help you determine which one is the most appropriate for your needs. Once you do this, drafting and filng the proper paperwork should be your priority.
