When starting a business it is important to have the type of legal structure in mind so as to implement it soon. The legal structure of a business determines the amount of paperwork you will have to handle and also the amount of tax you will have to pay. You should therefore spend a considerable amount of time consulting experts so as to choose a structure that fits your business.
It’s not a decision to be entered into lightly, either, or one that should be made without sound counsel from business experts. Kalish says it’s important for business owners to seek expert advice from business professionals when considering the pros and cons of various business entities.
“I’ve heard horror stories from people who, in hindsight, wish they had taken the time and spent the money to get expert advice upfront,” Kalish says. That advice can come from a variety of sources, ranging from the no cost/low cost, such as the SBA or the Service Corps of Retired Executives (SCORE), to pricier attorneys and accountants who can serve as valuable sources of information throughout the life of your business.
Sourced from: http://www.entrepreneur.com/article/38822
There are different types of business entities. The entity you choose should be a choice made after considering three factors namely taxation, record keeping and liability.
Types of Business Entities
This is a business run by one individual for his or her own benefit. It is the simplest form of business organization. Proprietorships have no existence apart from the owners. The liabilities associated with the business are the personal liabilities of the owner, and the business terminates upon the proprietor’s death. The proprietor undertakes the risks of the business to the extent of his/her assets, whether used in the business or personally owned.
Partnerships-General and Limited
A general partnership is an agreement, expressed or implied, between two or more persons who join together to carry on a business venture for profit. Each partner contributes money, property, labor, or skill; each shares in the profits and losses of the business; and each has unlimited personal liability for the debts of the business.
Limited partnerships limit the personal liability of individual partners for the debts of the business according to the amount they have invested. Partners must file a certificate of limited partnership with state authorities.
Sourced from: http://www.asha.org/practice/BusinessEntities/
For you to start out or make a choice you should also know the requirements. For a sole proprietorship you only need a license from your city. A partnership will definitely require help from a lawyer while a limited liability company is started by applying to the secretary of state.
To start a sole proprietorship, all you need is a business license for your city, possibly a “fictitious name” statement, and a business checking account. The sole proprietorship is the default business structure. This means that if you do nothing to register your business as another type, you are automatically a sole proprietorship, particularly for income tax purposes.
To start a partnership, you will need an attorney to help you with the partnership agreement and the state registration. There are various types of partnerships which you may form, depending on your business and the state in which your business is located.
To start a Limited Liability Company, you will need to apply to your state Secretary of State to become an LLC, by filing Articles of Organization. You may be able to do this filing yourself, or you can get an attorney to help.