The feds recently released two reports that show a promising outlook for business formation in 2021. Thus far, the federal figures for July report almost 500,000 new business applications. This is an increase from June — the first promising report. The second: an increase in the rate of “high propensity applications.” These applications are for businesses the Census Bureau believes have a “high likelihood of supporting a payroll.”
The reasons for the reported increases vary. However, as further discussed in a recent report by Forbes, the fact that the feds show an increase in the number of new business applications and the rate of high propensity applications in the midst of continued increases in COVID infection reports is good news. This shows that business continues to “have an appetite for new ventures.” In the past, this was not the case. Reports from the last eighteen plus months show that COVID rates directly impacted business venture rates. As such, this recent news is promising.
Those who are looking to take advantage of this growth and start their own businesses are wise to do some due diligence before they begin. One of the first decisions involves business structure. Entrepreneurs have many options, including:
- Sole proprietor. This is the most basic. Although the business owner has complete control, this entity does not offer protection from liability or tax benefits.
- Partnership. This option is available for those that have two or more business owners. There is generally limited liability protection, but, as noted by the United States Small Business Administration, it is often a good choice for businesses with more than one owner who are in the early stages of business development.
- Limited liability company (LLC). The LLC protects owners from personal liability, making it a good option for business that are medium to high risk who want to protect their personal assets.
- Corporations. There are many forms of corporations that can offer various benefits. The C corp is a separate legal entity offering the strongest personal liability protection to owners but comes at a higher formation cost. Other options include the S corp and nonprofits, which can offer additional tax benefits.
The right choice will depend on your business goals. It is important to carefully consider the risks and benefits of each before moving forward.