Before you can register your company, you need to decide what kind of entity it is. Your business structure legally affects everything from how you file your taxes to your personal liability if something goes wrong. If you own the business entirely by yourself and plan to be responsible for all debts and obligations, you can register for a sole proprietorship. Be warned that this route can directly affect your personal credit.
Alternatively, a partnership, as its name implies, means that two or more people are held personally liable as business owners. You don’t have to go it alone if you can find a business partner with complementary skills to your own. It’s usually a good idea to add someone into the mix to help your business flourish. If you want to separate your personal liability from your company’s liability, you may want to consider forming one of several types of corporations. This makes a business a separate entity apart from its owners, and, therefore, corporations can own property, assume liability, pay taxes, enter contracts, sue and be sued like any other individual.
One of the most common structures for small businesses, however, is the limited liability corporation. This hybrid structure has the legal protections of a corporation while allowing for the tax benefits of a partnership.
Corporations, especially C-corporations, are especially suitable for new businesses that plan on ‘going public’ or seeking funding from venture capitalists in the near future. Ultimately, it is up to you to determine which type of entity is best for your current needs and future business goals. It’s important to learn about the various legal business structures that are available. If you’re struggling to make up your mind, it’s not a bad idea to discuss the decision with a business or legal adviser.