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Which type of business entity best suits your needs?

You may have had a lifelong dream to one day start your own company. Now that the time to begin doing so has come, you may feel a great deal of excitement and apprehension. Though you certainly want to get your business up and running as soon as possible, you will need to answer many questions and make numerous decisions just to get the process started long before your business can open its doors.

One of the first decisions you may need to make relates to the type of entity you want to create with your company. Different options exist, and in order to determine the business structure that could work best for your situation, you may wish to find out more information on your options.

Sole proprietorship

The first type of business entity you may wish to consider is a sole proprietorship. This type of company comes in as the most common and can offer many attractive benefits. Most notably, a sole proprietorship gives you complete control over management aspects of your business, and sole proprietorships are generally easy to create. Because you would have such control over your company, you would also hold liability for any financial obligations.

Partnership

Another type of business organization you may wish to consider is a partnership. Perhaps you shared your lifelong business dream with a dear friend with whom you intend to start the company. In this case, a partnership may seem appealing. With a partnership, rather than holding sole liability for financial aspects of the business, you and your partner would share in gains and losses.

Corporation

If you consider creating a corporation, you would not hold as much personal responsibility when it comes to financial obligations of the business. In fact, the corporation would separate itself from you as the founder. The primary advantage of creating a corporation relates to removing your personal liability.

Limited Liability Company

You may have heard about limited liability companies more often as it seems that many start-up companies have LLC in their names. This type of business entity combines aspects of both a partnership and a corporation. Mainly, profits and losses pass through to you and other owners, but you still remain protected from personal liability issues.

Choosing an entity

The type of business organization that will work best for your company can depend on many factors. If you feel uncertain about how to move forward with this aspect of your business formation, you may wish to gain additional information. Speaking with a legal professional could help you during the decision-making process as well as when it comes to ensuring that your paperwork is in order.

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