Forming a business marks the start of a challenging and potentially prosperous adventure for would-be entrepreneurs. As a first step, business founders should familiarize themselves with the issues and considerations involved in selecting a business entity, entering into business agreements, hiring employees and understanding the municipal, state and federal laws that regulate their business.
Choice of Business Form
Business founders should carefully consider which business form may be most approrpriate for their new company. While many larger companies have adopted a C corporation form, a different form may be more advantageous depending on the your individual circumstances. Other business forms include S corporations, limited liability partnerships (LLPs), limited liability companies (LLCs), partnerships, and sole proprietorships.
Each business form subjects the business owners to different levels of liability and taxation. For example, shareholders of a C corporation are generally not personally liable for the debts of the corporation, while the partners in a partnership are personally liable for the debts of the partnership. However, partnership income flows through to the individual partners and is taxed only once while corporate income may be subject to double taxation: once at the corporate level and a second time at the individual level if the corporation pays dividends. A business lawyer can guide you through the different forms that may be appropriate in your situation, and explain the various administrative requirements you need to follow when starting up as well as on an annual basis.
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