Starting a new business can be one of the most challenging, highly rewarding (both financially as well as personally) and extremely exciting times in your professional life as you draft your vision and strategy in terms of what you wish to create and achieve.
However, just like any entrepreneur, first you need to begin with the very core basics.
One of the most important first steps is choosing a legal structure for your company.
There are several common formal business ownership structures to choose from and each one carries distinct advantages and disadvantages that need to be weighed and reviewed.
This strategic decision carries significant long-term implications, so the founder needs to decide which form of business entity is right for him, depending on the type of organization he wishes to establish, the industry it belongs to, the number of owners, the future growth goals, the unique financial situation as well as various other factors.
Since each option has its own set of unique characteristics, there are several key criteria you need to compare, consider and carefully evaluate, before making an actual decision regarding the chosen type of business entity to form.
Both present and future needs for operating the business have to be fully explored and analyzed before reaching a final conclusion.
A business’ legal structure determines who owns, controls and makes the day-to-day management decisions, how much you pay in taxes, what records you need to maintain, the amount of regulatory paperwork your business is required to file, who has financial liability and the ability to raise capital.
Making an informed decision which takes under account all relevant aspects, can genuinely help maximize the chances of financial, administrative and operational success.
It’s important to remember that as your business evolves, develops and changes, you should occasionally ask yourself whether the legal entity form you have chosen remains the best type of organization structure for your business.
The most common legal structure options for forming a business in the United States are:
- LLC (Limited Liability Company)
- Corporation (S-Corp & C-Corp)
- Professional Corporation (PC)
- Benefit Corporation
- Non Profit Corporation
- Sole Proprietorship