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What should I base my business formation decision on?

| Mar 31, 2021 | Business Formation |

Knowing how to make an informed business formation decision, and what business form is best, is important. A number of different considerations should go into business formation and anyone starting up a business should be familiar with what those are.

How to decide which business form to choose

There are several different business forms that new business owners can choose from including sole proprietorships, partnerships, limited liability companies and corporate structures. There are several factors that a business formation decision should be based on including:

  • Personal liability – the amount of personal liability the business owners or members will have is an important consideration to take into account.
  • Taxation – the tax treatment of the particular business form selected is an important consideration. Whether the owners or members are taxed and the business entity is also taxed is important to understand.
  • Cost to operate – the costs associated with operating the particular business form are also important to take into account.
  • Regulations – the costs associated with the regulation of the business form selected should also be considered, as some business forms are more heavily regulated than others.
  • Control and management – the amount of control and management the business owner will have can also be impacted by the business form they select so they should understand how that might impact their decision.
  • Raising capital – how difficult it will be to raise capital based on the form selected should also not be overlooked when selecting the best business form for the venture.

Selecting the best business form is an important step in the business formation process. The new business owner will want their selection to support the needs of their business as it starts, as well as when it begins to grow. Business law can help them navigate those challenging, yet important decisions.

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