The Many Splended Forms of Legal Business Ownership

When you have come to the conclusion to start your own business, one of the first decisions that you will need to make is how you will set it up as a legal entity. Whether you are thinking about a Sole Proprietorship, Partnership, Incorporating or forming a Legal Liability Company, there are considerations with each legal entity.

Sole proprietorship

This is probably the easiest form to set up. Sole proprietorship is good if you want to have complete control over your business. Legally, you and your business are the same entity. You own all of the assets and all of the revenue generated by it. You are however, completely liable for any debts or legal judgments against your business and it places your personal assets at risk as well. In addition, being a Sole Proprietorship could put you at a disadvantage if you need any financing.

Partnership

In this form of legal entity two or more people share in the ownership of the business. As a partner, you are jointly and individually responsible for the actions of your partner. Also you will have to share the profits with your partner. The good things about partnerships is that it might be easier to raise money and your partner might bring needed skills.

Incorporation

A corporation is legally, an entity all of it's own so, any debt or liability is tied to the business itself and not the original owner. With this form of business you will have to give up control--the shareholders own the business and will elect a board of directors. A corporation can be taxed ,sued or enter into a legal agreement. It generally costs more to set up then other forms of ownership and will result in higher taxes. Also , it will be regulated by the state and will result in more paperwork. The good points of Incorporation is that shareholders have limited liability. Also you can raise capital by issuing shares of stock and if the original owner dies the corporation lives on.

The Limited Liability Company

With the Limited Liability Company the owners are members and the duration of the company is determined when the paperwork is filed. The LLC has the limited liability features of a corporation and it also has the tax efficiencies and flexibility of a partnership.