Open for business, yet? Are you sure you have selected the right type of corporation or business structure to minimize your personal liabilities and taxes and to maximize your profits.
Every semester I ask my business students to pretend they are starting a business or organization and then I ask them to consider some of the following questions:
- Do I have the necessary skills, or do I want to partner with someone who might complement my skills?
- Are there any risks my customers take in using my service or product and how high are those risks?
- Can my business survive if I leave the business?
- Do I want to share the obligations?
- What type of personal liability am I prepared to take?
- How much money do I need?
- What are my long-term growth goals?
- How do I want decisions to be made? How much control do I want?
These are just a few questions that need to be answered before you decide what type of business ownership or structure is right for your business.
Here’s what I say to my students.
Hire an attorney!
However, not every business owner can afford that. Even if you can, some basic awareness prior to meeting with an attorney will give you a foundation of knowledge and might save you an hour of attorneys’ fees (and we all know how high those can run).
Regardless, don’t panic; businesses do evolve, and once you choose a structure, you are not stuck with it for the rest of your life in the business.
Basic: Here is a basic view of the main types of business structures, complete with resources you can use to make an informed decision.
You will learn at the end of this that the LLC structure is one of the best structures out there today for small businesses to consider.
Five main areas to consider are:
- Personal liability
- Your ability to raise money
- Control/Flexibility Desired
- Continuity of the Business (can the business live if you leave or pass away?)
Note: I am not an attorney or accountant. Before you make any decisions here, please seek advice from as many business experts as you can to get recommendations on your specific business needs and requirements.
Still not ready to make a decision?
Look below at some additional resources.
Advanced: Resources for a More Advanced View
Business Owners Idea Cafe is a great chart comparison
IRS – always a good place to look
Khan Academy – if you haven’t heard of Khan Academy, I highly recommend you take a visit
IRS – covering LLC’s
Now to You
Is this a decision you are currently facing? How are you going about making your decision?