Like many in Ohio, you may have reached the point in your career where you are tired of working for someone else, and may be thinking of venturing off on your own. If you are thinking about starting a new business, it's important to understand that doing so involves more than just launching a website and selling your product or service. There are legal issues to address, including taxes and liability.
Examining how you want to deal with these types of issues will help determine the business entity you need.
Which business entity is right for you?
Even if you have a business degree, choosing the right business entity for your venture is complicated and there are numerous factors to consider—including the specific laws and limitations for each entity in your state. Below is an overview of the most common types of entities to choose from:
- Limited Liability Company: As an LLC, your business owns the rights to its assets, so your personal assets are safe if someone decides to sue the business. You and any other members of the LLC act under an operating agreement, and have several options for electing how the IRS should tax your business.
- Corporation: Shareholders invest in your business, and those with a larger number of shares have more power in the company. The corporation exists as a separate legal entity with its own liability risk.
- Partnership: While there are different levels of partnerships, a general partnership is when one or more entrepreneurs contribute the capital necessary to start the business. Working under a partnership agreement, you and your partners divide the responsibilities and may be accountable for the individual liabilities of the partners.
- Sole proprietorship: Certain businesses lend themselves to this formation wherein you organize, manage and control every aspect of the business. You reap the profits, but also assume liability.
These are just a few of the different types of business entities you can choose. Each offers its own benefits, and all come with risks and disadvantages. It’s always a good idea to consult with a legal professional throughout the business formation process.