Starting your own business can be scary, overwhelming, exciting, and confusing all at the same time. It takes a certain type of person to become an entrepreneur: smart, driven, goal oriented, a risk lover, detail oriented, hardworking, creative, ambitious . . . and well, you get the gist. Starting a business and being successful requires a lot of different skill sets. Unfortunately, most of us don’t have all of the needed skills, some of us are planners, some procrastinators, some are creative geniuses and other financial whizzes. That is why about 75% of small business are a partnership or some form thereof and that is why it’s important to not only have a great idea for your business but to put some thought into what type of business entity is right for you. Whether you are starting a business in Texas, California, Oregon, or Michigan the types of business entities will be very similar although each state offers their own twists on the general types of business formations.
The most common business entities are:
- Partnership, including limited partnerships and limited liability partnerships
- Limited liability corporations (LLC), including professional limited liability corporations
- Corporations, including professional corporations
Each of these business entities offer distinct advantages and disadvantages. Before you make a decision you should evaluate each business entity in light of the following questions:
- How many individuals will be involved in the business?
- How will each individual be contributing to the business? Equity (money)? Expertise? Labor?
- How involved does each individual want to be in the business on a day to day basis?
- How much capital (money) is there to start the business?
- Will the business need additional capital to continue operations once it is started?
- What is the long term goal for the business? Stay small? Become a major player in the given industry?
With the answers to these questions you will have a basis from which you can start your inquiry into the perfect business entity for you. Often times when you are starting a business it makes good financial sense to seek the guidance of a professional. There are many nonprofit organizations that assists new business owners, as well as lawyers, accountants, and consultants. Check back soon for more information on each business entity, with a discussion of risks, benefits, and how to’s.
Building a business is exciting and rewarding, best of luck as you start your journey!
Vethan Law Firm, P.C.