Business Entity Structuring

One of the first decisions an entrepreneur must make is to choose a business entity structuring. The choices are numerous and most small business starters are familiar with the seven main entity types: sole proprietorship, general partnership, limited partnership, corporation, limited liability corporation, S-corporation andlimited liability partnership. Each entity is designed for different business needs. So when choosing the one that's right for your business, you need to consider the following issues:

• Liability and asset protection - Personal liability should be you major concern in choosing your business entity. Note that sole proprietorships and general partnerships offer no liability protection for their owners/partners.
• Tax savings and reporting requirements - Some business entities will allow you to save money on your income taxes by passing the income directly to the owner. This way, the owner avoids his money being taxed twice (once at the corporate level, once at the individual level.)
• Cost - This refers to the cost of creating and maintaining your business entity.
• Convenience - How easy it is to create, run and dissolve the organization.
• Maintenance - The burden of yearly paperwork to maintain your business entity.
• Ownership Concerns - Different entities have different rules for how many owners it can have. And in some cases you may need to change your company’s form of entity to accomplish a transition in ownership.
• Business Financing - The specific types of debt and equity financing available to you are, to some extent, determined by your business entity structuring. For example, sole proprietorship might be the most restrictive entity for equity financing.

There are also some other factors that you might want to consider when choosing a business entity. For example, the size of your business, the type of industry you are in and the scope of your business operation might all affect your decision.

Click on the above links to get more information about each business entity.