Regardless of, and maybe because of, your dreams for your business, business formation is an important step. There are a variety of considerations to take into account and it is an important step that should not be overlooked or underestimated for its impact on the rest of the life of the business.
Business formation considerations
Business law is an area of the law that can help business owners through all of the important phases of their business. One of those important first faces is choosing the best business form for the business. The business owner should evaluate their business formation options based on a variety of considerations including personal liability protection, taxation, control of the business, costs to run the business and some others.
The different business forms
The simplest and most basic business form is as sole proprietorship which is taxed on the sole proprietor’s personal income tax return. A sole proprietorship does not offer personal liability protection for the business owner. A partnership is another business formation option which is taxed similarly to a sole proprietorship and also does not afford personal liability protection but is commonly run according to a partnership agreement with the partners in the business.
A third business type to choose from is the corporate business structure. Corporations provide personal liability protection but can be more costly and complicated to run and are also sometimes referred to as double taxed because taxes will be due on the corporation’s earnings as well as the earnings of its owners or shareholders. Lastly, a limited liability company is another business formation option to consider which provides personal liability protection and allows the owners to decide if they want to be taxed as a corporation or a partnership.
There are many business formation tools available to business owners to guide them in getting started. All they need to do is ensure they are familiar with the different options available and select the best option for the needs and goals they have for themselves and their business.