Congratulations! You’ve decided to start you own business. You’re probably excited to jump right in, but there are many decisions to be made. When you start a business, you need to carefully consider the legal and financial implications. It is important to go through the official business formation process in order to shield yourself from liability and establish a company bank account.
You have various options when it comes to choosing which type of company you would like to form. Here are the traditional types of companies you can choose from:
Sole Proprietorship: A Sole Proprietorship exists for individuals or for a married-couple running a business alone. While a Sole Proprietorship is very simple to form, manage, and operate, it comes with the downside that the individual or couple are personally liable for the debts incurred by the business.
General Partnership: A General Partnership can be comprised of two or more members who agree to jointly own and manage a business. While each partner shares in the profits of the Company, each partner is equally personally liable for the debts of the Company.
Limited Partnership: A Limited Partnership has one or more general partners, and one or more limited partners. General partners take a role in managing the business and share collectively in the profits and losses while limited partners share in profits, but their losses are limited to the level of their investments.
Limited Liability Partnership (“LLP”): LLPs are similar to General Partnerships, however, in LLPs partners do not have liability for negligence of another partner.
Corporation: A corporation is a more complex type of business. A corporation is similar to an individual in that it possesses certain rights, privileges, and liabilities. While a corporation comes with certain tax and financial benefits, the Company may have to pay higher licensing fees and the owners do not have as much personal control.
Limited Liability Corporation (“LLC”): LLCs blend a more unrestricted Company structure with the ability to shield owners from liability and debts incurred by the Company. An LLC can be formed by one or more individual or entities. LLCs are very popular for new businesses because they provide flexibility while still maintaining protection to owners.
You may ask yourself why you need to file to form your business at all. Incorporating your business is essential in order to protect your personal assets. It can also help to provide you with name recognition and protection, offer you with certain tax benefits, and allow your business to survive if one or more of the original owners passes away or leaves the business.
For more information regarding Company formation and structure, and advice regarding which Company type is best for you, please feel free to contact us at (973)536-2224, or firstname.lastname@example.org.