This blog recently looked at selecting the best business form for any business so it might be helpful to take a look at the different business form options that are available. As recently discussed, there are a variety of important impacts the sometimes seemingly meaningless selection of a business form has related to control of the business, the daily activities of the business, tax consequences, regulatory requirements and liability for the business and its members.
Selection of a business form is anything but meaningless and should always be carefully understood and considered. One of the most common forms for businesses is the sole proprietorship. While this provides complete control for the sole proprietor and some tax benefits, it does little to limit liability of the sole proprietor. Partnerships are another common business form that allows partners to share control of the business. Additional options to limit liability may be available for partnerships.
A limited liability company is another option for business owners to consider. Limited liability companies provide flexibility including favorable taxation associated with partnerships and limits on liability. Control of the business can be outlined according to how the business structure is set up. The corporate structure is another option that provides limits on liability but can be costly to run, subject to many regulatory requirements and is considered doubly taxed because the corporation, as well as the owners, are taxed.
When starting a business, selecting the best business structure that allows for the long-term health and growth of the business requires a thorough knowledge of the benefits and potential drawbacks of the different business forms. Business law options provide flexibility to help business owners set up and grow their businesses so business owners should be familiar with the legal resources available to help them.