So you have an idea for a new business, but you’re not sure where to start. There are a ton of different moving parts that need to fit into place before you can officially launch, but the most important of them is figuring out how to structure your new enterprise. So, with that in mind, let’s see what goes into deciding how to structure your business.
What Kind of Company Can You Form?
There are four primary types of business structures from which you can choose, and they each have benefits and downsides. Overall, it’s important that you think about your company for the long term, rather than what is most expedient right now.
- Sole Proprietorship:
If you are starting a new enterprise that is run entirely by you, then this can be an excellent way to set it up. Tax wise, your new company’s profits will be tied to your personal finances, which means that a) you won’t be able to set up a merchant bank account and b) if the business owes money, you owe money.
- Partnership:
As a general rule, this is ideal for companies that are built around two or more people. It works the same way as a sole proprietorship, except that multiple individuals are part of the structure. This means that your finances are again tied to the business, and you are liable for losses and debts.
- LLC:
If you want to keep your personal assets separated from your enterprise and you want to have multiple partners, then you should fill out LLC forms. However, the company is tied to whoever enters the agreement, so if one person leaves or wants to renegotiate a deal, you have to dissolve your initial filing.
- Corporation:
You can either form a C or S-corporation, and both structures offer protection from personal liability. C-corps are taxed on income and profits, so small businesses usually prefer S-corps, which “pass through” all money made from the company. This is the most resilient business type and allows members and shareholders to change without dissolving the overall structure.
If you have any questions on how to form your business, check out Gov Doc Filing online and you can see more information, as well as submit your paperwork when the time is right.
