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Incorporating - Your Choices |
By:
Richard A. Chapo |
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Incorporating - Your Choices
by Richard A. Chapo
If you are starting a business, you must give some thought to the form the business will take. There are a wide variety of choices and some make more sense than others in particular situations. Make the wrong decision and you can really regret it.
In making the decision, it is important that you understand some of the verbiage commonly, and incorrectly, used. You will be told this is all about incorporation, but it really means the choice between a corporation, LLC, and other entities.
The truth of the matter is there are many different business forms you can choose from. A corporation is one of the oldest and most stable, but it is hardly the only one out there. Let's take a closer look at some of the more popular business entities.
What is the single most common business form in the world? It is the sole proprietor. This occurs when one person just starts doing business. It is highly flexible, but not great overall. You are personally exposed to liability and the tax situation is not great.
If two or more people pursue a business venture without forming an entity, they are automatically designated as a general partnership. General partnerships are horrific business entities because they expose the partners to all the debts of the partnership.
There are some advantages to a partnership. While you are exposed from a liability perspective, the tax situation isn't too bad. The partnership does not pay taxes like a corporation because they flow through to the owners.
A relative new and popular entity is the limited liability company. Referred to by its abbreviation LLC, this entity offers the flexibility of a partnership and the liability protection of a corporation.
The LLC was touted as a revolutionary new business entity that would make life easy for small businesses. It has the characteristics of it, but the entity is disfavored by many professionals. There are simply too many taxes and fees associated with it.
The corporation is our next subject of discussion. It is the oldest formal business entity. It provides ironclad liability protection when run correctly. This means people that invest in the entity are not personally responsible for its debts.
There are definitely cons to choosing a corporation for your business. It is a formal business and archaic rules must be followed. This often means retaining a business attorney to make sure you are incompliance, a costly requirement.
To determine the best choice for your business, it is worth slapping down a few dollars to talk with a CPA and attorney. General discussions about business entities are great and all, but you need advice about your specific situation.
Get information on how to incorporate in California at SanDiegoBusinessLawFirm.com. Click here for other unique 'business entity' articles.
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Article Source: http://www.statssheet.com/articles/article55590.html |
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