Entrepreneurs looking to start a business are wise to choose the right business structure. The right fit will vary depending on your business interests and goals, but the following questions can help you get on track to finding the right structure for your needs.
#1: What type of control do I want to have over the business?
The structure you choose will impact the control you have over the business. Options like sole proprietorship, limited liability company (LLC), and a corporation are some examples of options that can be owned by one individual who can retain the majority of control while a partnership or corporation with multiple owners requires collaboration with others.
#2: What type of liability protection do I want?
One benefit that comes with business formation is the possibility to separate your personal finances from your business assets. If something goes wrong the business, the business assets are at risk, but your own finances are theoretically protected.
This benefit is not available with every formation. A sole proprietorship does not have this option.
#3: How much time am I willing to commit to forms and paperwork?
A corporation requires a lot of paperwork compared to a sole proprietorship. Why would a business owner put the time and expense into this type of formation? Because there are benefits like the liability protection noted above, additional investment options and some tax benefits.
These are a few things to consider when finding the right business structure to meet your needs. Additional discussions, including the impact of tax obligations, are also needed to reduce the risk of any surprises after your business is up and running.