1 Choosing the Form of Your Business
} Sole Proprietorship ^ Partnership } Corporation
^ Limited Liability Company
^ Nonprofit Entities
} Joint Ventures and Corporate Partnerships
} Registered Agents
^ Choosing the State in which to Form Your Business
} Qualifications for Starting a Business
Choosing the correct form of business entity is an important decision when starting a business. Not all entities are suited for raising substantial amounts of capital or flexible enough to grow with your changing needs. Most business entities that need to raise capital will organize either as a corporation or limited liability company (LLC) because of the financing options available. With a little forethought and the ability to understand the advantages and disadvantages of the different types of entities, your business will have the capability to achieve your goals.
QUICK Tip
Basic Questions to Ask Yourself when Choosing Your Form of Business:
• How easy is it to set up and operate the entity?
• What kind of capital can I raise in the entity?
• What are the tax advantages and disadvantages of the entity?
• Who is liable for the business debts and obligations?
• What happens if I die or become disabled?
The most common business forms are sole proprietorships, corporations, limited liability companies (LLCs), and partnerships. This chapter explains some of the characteristics, advantages, and disadvantages of each entity, and ends with an explanation of how to form the one you choose.
