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If you are starting a business, you must give some thought to the form the business will take. There are a wide variety of choices and some make more sense than others in particular situations. Make the wrong decision and you can really regret it. In legal terms, the issue facing you is known as the decision to incorporate. This is a bit of an incorrect use of the word incorporate. While the corporate entity is common, there are plenty of others as well. As a business owner, you are faced with a wide variety of choices when it comes to business entities. Each has strengths and weaknesses. Some have been around forever such as the corporation while others are new. Most businesses are small businesses that live a risky life by not forming business entities at all. These are known as sole propretors. The risk with this approach lies in the lack of protection from personal liability for business debts. What if you have two owners of an unincorporated business? The default designation is a general partnership. The tax situation is a bit better, but liability is a big problem. You are personally responsible for debts and lawsuits of the partnership. Although the partnership is often a default situation, it is form of business that can be elected. Why would someone form a partnership? Primarily for flexibility and tax purposes. There are no corporate formalities and taxes flow to the partners' returns. The limited liability company is promoted as the greatest thing since sliced bread for small businesses. The benefits come in the form of flexibility, favorable tax designation as a partnership and protection from personal liability for business debts. The LLC was touted as a revolutionary new business entity that would make life easy for small businesses. It has the characteristics of it, but the entity is disfavored by many professionals. There are simply too many taxes and fees associated with it. The corporate entity is the beast of business entities. Created hundreds of years ago, it is the basic business entity of stock markets and multinational businesses. It is best known for providing protection to owners from business debts. All is not good when discussing the corporate entity. Before choosing a corporation, you need to recognize there are a ton of formal rules that must be followed. Most entities end up retaining a busines attorney, which costs money. To determine the best choice for your business, it is worth slapping down a few dollars to talk with a CPA and attorney. General discussions about business entities are great and all, but you need advice about your specific situation.
Article Source: http://www.articletap.com
Richard A. Chapo helps businesses incorporate in California via his site at SanDiegoBusinessLawFirm.com.
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