Business formation is a vital part of starting any new business endeavor. Sometimes it is an overlooked part of the process of forming a new business but because of its implications, should not be.
Business formation has a significant impact on the daily workings of the business; who controls the business and makes decisions for it; how the business and those engaged in the business are taxed; and the personal liability that those engaged in the business may have if anything goes wrong. For all these reasons, it is important to understand the different business forms and what they have to offer.
Each business form may have benefits and potential drawbacks, especially for the entrepreneur’s specific business. The selection of a business form should be tailored to meet the needs of the business as it starts up and as it begins to grow. It is important to pay careful attention to the selection of a business form when the business starts up but also as it grows. The type of business form selected will determine some of its maintenance needs including state and local requirements and regulations.
Business forms range from sole proprietorships, partnerships, limited liability companies and corporations, with additional options in between in some instances, and each should be thoroughly understood and considered by the business owner based on their needs and goals for the business. Once the entrepreneur understands their options, they can make the best business formation decision for their business to help ensure its future health and success.