DETERMINE A BUSINESS STRUCTURE

Incorporation

Step one in starting a small business is to select the appropriate legal business structure. The different business structures will vary in costs, complexity of management and the benefits derived. This list of business structures presents the most popular legal structures that are used by most business owners in the today:

Common Business Structures

• Sole Proprietorship
• General Partnership
• Joint Venture
• Limited Partnership
• Limited Liability Partnership
• LLC or Limited Liability Company
• Corporation
• S Corporation
• Non Profit Corporation
• Professional Corporation

Is Incorporating Right for you?
Reasons for not Incorporating
While most individuals with business savvy recognize that there are benefits to incorporating a business, many are discouraged from doing so for the following reasons:

• Costly setup fees.
• Lack of information as to the how to properly maintain a corporation.
• Complex or unknown filing process.
• Complexity of the incorporation process.

Who should Incorporate?
The process has been significantly simplified. State offices now offer free sample forms and sample articles of incorporation.

Thus, many of the reasons for NOT incorporating have been removed. Still, incorporating a business is not for everyone. The questions below can be used to better determine whether incorporating your business may be a good choice for you.

• Do you plan to hire employees in the year?
• Do you want to raise capital for your business?
• Do you want to sell stock?
• Are you seeking a government contract?
• Is there a municipality that requires contract bidders be incorporated entities?
• Do you want your business to continue after your death or the death of a partner?
• Do you own real estate?
• Are you concerned about protecting your personal assets from business creditors?
• Will your business have partners or other stakeholders?
• Are you concerned about a partner possibly binding you and your personal assets without your consent or knowledge?
• Would your business benefit from tax benefits extended solely to corporations?

If you answered “Yes” to any of the above questions, incorporating your business may be in your best interest.

Comparison of Business Structures
The grid below presents some of the most important features of common business structures.

NOTE: This chart has been drafted based on the laws in the majority of states and has been presented in a simplified form to illustrate general differences