For years, you may have thought about the possibility of starting your own business. Perhaps you have been working for other people since you were a teenager, and you knew early on that you wanted to be your own boss.
Have you considered the options available for running a small business? There are more alternatives than just you and your company. In fact, other business formations may offer you more protection from risks businesses often face.
What works for you?
As a sole proprietor, you bear the burden of everything that could go wrong in your company. In fact, your personal assets may suffer if you face a lawsuit, debt or other damaging event. While a sole proprietorship may be the easiest and least expensive way to start your business, you may want more security such as that offered in other business formations, including the following:
- Partnership: In a simple partnership, you and your colleague share liability for any lawsuits and business debts. However, you may establish a partnership agreement that outlines how you will share the responsibilities in the business as well as the profits and losses.
- Limited Liability Company: This business formation is an entity all its own, and you and any partners are members of the company. The LLC assumes liability for any debts since one takes those debts out in the name of the LLC, not the individual members. The LLC will have a separate bank account, and all business finances will flow through the LLC instead of you personally. You also have options for dealing with your taxes in an LLC.
- Corporation: You can expect to pay more for this very formal business entity. A corporation formation requires you to file Articles of Incorporation with the appropriate department in Tennessee. The complexity of a corporation includes taxation on your earnings as well as on the dividends shareholders receive. There are several kinds of corporations, but each one offers limited liability to you and any of your partners.
Whether you choose the most complex corporation as the formation for your business or the simple sole proprietorship, you can’t underestimate the value of having solid legal guidance from the beginning of your endeavor. Since there are regulations and laws overseeing every type of business, you want to be certain not to overlook essential elements of compliance that may place your business at risk. Seeking legal assistance from the earliest stages of your business formation means acquiring an advocate for the life of your business.