Entrepreneurship is a time-honored American tradition. If you have found yourself at a crossroads in your professional life, tired of working for someone else’s bottom line, it may be time to go into business for yourself. While owning your own business can be uniquely rewarding, it is certainly not without its challenges. In the early days, especially, you can expect to work long hours to ensure that your venture successfully gets off the ground. This typically means a lot of preparation and planning. Outside of tailoring a rock-solid business plan, hiring a strong team, and renting out office space, you may also need to designate a legal structure for your business. Commonly, entrepreneurs will choose between limited liability company (LLC), partnership and corporation forms. Of course, these structures have different advantages and drawbacks, and what you choose will ultimately depend on the needs of your business.
The most basic form of a business is typically a sole proprietorship. This is generally used if your business is operated by just you, and your tax and legal needs are not considerable. While this structure can be suitable for a while in the nascent days of your business, it is not uncommon to outgrow it, particularly if you begin hiring employees and expanding your operations. Read on to learn more about the different types of legal structures available, as well as how you can process your forms online.
When Is a Partnership a Good Fit?
In the business world, it is not uncommon for two or more like-minded individuals to enter into a joint venture. There are a number of reasons this can be advantageous. For one, it allows you to utilize the professional expertise of others as you work together to build a successful enterprise. Another important factor to think about is that a partnership can help you mitigate some of the inherent risks that come with starting a business, especially as it pertains to your own personal investment in getting your operation up and running.
A general partnership (GP), is the most fundamental form of a business partnership. This technically occurs any time two or more people start a business together, and it can be solidified with a simple handshake or verbal agreement. Some GPs will opt to draft an operating and profit-sharing agreement to formalize things a bit, while others will graduate to a limited liability partnership (LLP).
What to Know About Forming a Corporation
You may associate the term “corporation” with large, multinational organizations. While it is true that many big companies are incorporated, it is a business formation that is available to smaller organizations as well. A corporation is technically its own legal entity that is distinct from its owners. To put it another way, a corporation will have many of the same rights as an individual, including the ability to borrow and lend money, hire employees, pay taxes, and more.
One of the primary draws to creating a corporation is that it affords your company the ability to issue stock. This can allow you to generate quick cash for your business in order to facilitate growth. This comes in contrast to, say, LLPs and LLCs, which can have trouble securing outside investment. Corporations are, however, more rigid in how they can be managed, and they are subject to more rules and regulations than other legal structures.
The Appeal of Limited Liability Companies
Limited liability companies are incredibly popular legal structures in the business world–and for good reason. For one, they are available in all 50 states, unlike LLPs. They are also relatively easy to set up and require very little in the way of annual reporting. When you create an LLC, you also give yourself and your fellow members limited liability protection. This means that if your business files for bankruptcy or is subjected to costly lawsuits, you can protect your personal assets from any potential legal judgments.
With a limited liability company, you will also be granted “pass-through” status by the Internal Revenue Service (IRS). With this designation, your business will not need to pay taxes on any profits generated off the top, but rather the LLC’s members will be taxed on their individual income. This is a considerable tax advantage for business owners and comes in contrast to certain corporate structures, which may need to pay taxes “twice.”
Filing Your LLC, Partnership and Corporation Forms
At Corporation Center, we have all the LLC, partnership and corporation forms that you need on one convenient website. By using our streamlined, easy-to-fill web forms and our SSL-encrypted web portal, you can process your documents quickly and securely. If you would like to learn more, visit our Frequently Asked Questions page, or take a moment to explore our website. You can also email or call one of our customer service representatives with any questions you may have.