Many first-time business owners are excited, and rightfully so! But the decisions made in the first few months of a business’s life can make an enormous difference for both the business’s health and for the owner’s financial future. And it starts with the very first decision you make: how do you register your business?
Business entity formation can impact taxes, profitability and liability. Despite the fact that you can, in some cases, change a business’s type, making the right choice from the start is the best-case scenario.
Understanding the basics of business formation
There are a wide range of entities for you to choose from, including sole proprietorships, limited liability corporations and partnerships. Each comes with its own set of benefits and drawbacks.
In addition to working with an experienced attorney, you should ask yourself some questions:
- Are you in business by yourself or are you working with a partner or partners?
- What types of taxes are involved in your business and are you prepared to undertake that burden on your own?
- Are there logistical factors to consider like employee size, working across state lines or licensing issues?
Depending on your choices, your business may require substantial additional legal work. You should anticipate that your choice will change your business’s future and take any possible steps to prepare for that future.
The next steps are clear
You need to be cautious. For your business to thrive, you need to take intentional steps toward finding the right business entity for your endeavors.