What to consider when choosing the right entity for your business
You should choose your business structure based on your (and potential partner(s)) needs. Your business structure determines what it costs to start up, how much your business will owe in taxes, and the personal liability you and potential business partners will take on.
Familiarize yourself with each type of business entity and then ask yourself the following 5 questions:
- Are you starting the business alone or will you have partners? Will the partners be equal shareholders?
- Will you and/or partners actively participate in operating the business or just an investor(s)?
- To what extent do you and/or partners need to be protected from legal liability?
- What kind of tax implications are you and/or partners willing to take on?
- What will happen to the business when you die? What if you decide to sell the business?
Be sure to consult with your attorney, accountant or tax professional about which type of business is most beneficial for your specific situation and goals before making a final decision.