What steps must be taken to start a new business? One of the first things to decide is how to choose the best legal structure for your company. There are many options available to you. It is important to fully understand how best to legally structure your business to ensure you get the protection you and your business will need.
Now is the time to move on to the documentation and legal side of your business.
A business is generally regulated by state, federal, and local laws. One of the first things to check is what the requirements are for you. When you go about the task of registering your business, be sure to cover all the necessary records at each of these levels, depending on your location. Here are some popular options to choose as your business legal structure.
Limited Liability Company
Commonly known as LLC, this type of structure is less complex than a corporation but slightly more complicated than a partnership or sole proprietorship. The owners are not personally responsible for any legal or financial liability of the company. This is one of the reasons that the limited liability company is a popular structure.
Corporation
A legal corporation is an entity that is distinct and separate from any of its owners. You have most of the responsibilities that any individual would have, such as obtaining loans, lending money, entering into contractual agreements, hiring staff, owning assets, and being sued.
It is considered
more complicated than any of the other company structures and is generally suitable for larger, established companies with many employees. For those looking to obtain venture financing, this is considered the best option.
Only Owner
This is essentially a business that is owned and operated by an individual. The government makes no distinction between the company itself and the person who owns it. You can conduct business under your own name, or you can give your business a unique name by registering it with a DBA, also known as “Doing Business As.” This is a quick and easy way to start a new business; it also gives you simple tax planning and preparation requirements.