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Different Business Formation Options for Your Company


When starting a business, the first thing you need to decide on is what legal form it should take. There are several considerations that need to be factored in for this, and a good understanding of business law in both the federal and state levels is necessary.

There are several kinds of legal business forms, each with their own taxation requirements. These include:

  • C-Corporations
  • General partnership
  • Legal liability company (LLC)
  • Limited liability partnership (LLP)
  • Limited partnership
  • Medical / legal professional entity formation
  • S-Corporations
  • Sole proprietorship

In order to decide which business form there are three things you have take into account.

Ease of Formation

Some business types are easier to form than others. A sole proprietorship, for example, will often only take a day or two to set up because in some states you don’t even have to file any legal documents. You only need to choose and file a name, get a license and permit to operate and zoning clearance, and get an Employer Identification Number. That’s it. Other business formats may require much more time and trouble.


Some people say that it is better to form a corporation because the individual owners or shareholders have limited personal liability when trouble comes a-knocking. In a sole proprietorship or partnership, the liability is taken on by owner or partners. But this advantage is also present for limited liability companies or partnerships. There are also two types of corporations, so it is important to know the difference between the different business forms when it comes to liability.


Another important consideration is how a business will be taxed. There are a myriad of laws that address this, and each business form has tax pros and cons attached. Tax laws can be difficult for ordinary people to understand, so this is usually the purview of accountants and lawyers.

When setting up a business, the above three factors play a big part in the legal personality of your enterprise. Starting a business is stressful enough. You shouldn’t overload yourself trying to learn all of the different legal processes. You can have a business attorney do all that for you. If you start the business in the best legal form for your particular needs, you will reap the fruits later on. A business lawyer who is aware of federal and local business laws can be of invaluable assistance in helping you achieve your business goals.

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