Starting a Business - There are many ways to structure a business. If you're not sure which one is right for you, consult a legal or tax advisor. Certain states also offer other options that might accommodate your plans.
This is the simplest way for an individual or married couple to go into business. There is less regulation and there are fewer taxes, but the business owner is personally liable for all debts.
General partnerships are composed of two or more people who participate in the business by investing money or labor while sharing the profits or losses. Each partner is liable for debts incurred. Before entering into one, put the terms of the partnership into a formal written agreement.
At some point, if the partnership breaks up, you'll want that process laid out in advance to avoid any conflict.
Limited Liability Company (LLC)
An LLC can be either an individual or a group of partners. The advantage of forming an LLC is that participants are not personally liable for the debts of the company. A written agreement that details the following is required: provisions for management, ability to assign interests, and distribution of profits and losses.
Write an LLC formation agreement You can sometimes find packaged agreements available at a lesser cost than a lawyer, but make sure your source is reputable.
As a separate legal entity, the corporation finances and records are established and maintained completely separate and distinct from the finances and records of the stockholders. Through a resolution adopted at a stockholders meeting held in accordance with the bylaws of the corporation, one or more officers or employees of the corporation are authorized to conduct business on behalf of the corporation. The resolution typically includes an authorization with specified limits to borrow and repay funds as needed for business operations. Credit arrangements are made in the name of the corporation with loan documents signed by the authorized person or persons after the lender has received a certified copy of the authorizing resolution. If the corporation is newly formed, small (has few assets), or has a limited record of credit use, it's likely that a lender will require personal guarantees by one or more officers or stockholders before approving a credit application received from the corporation. If personal guarantees are given, the signer(s) usually have unlimited liability for the debts of the corporation.
Incorporating your business may have tax or financial benefits, but you also have increased licensing fees and a more complicated process. Stock ownership determines control of the company, and board of directors' meetings and annual stockholder meetings should be held. Record keeping requirements are also more extensive. If you're forming a corporation, you'll want to seek legal counsel.