There is much more involved with starting a business than simply having a good idea for a company and then creating a Facebook page. In the weeks and months leading up to starting a business, there are important decisions you will have to make that will lay the groundwork for the future direction and success of your company. One of these includes the choice of a business entity.
The business entity or type of structure will impact how your Colorado company operates in the future, taxation and your personal liability for business debts. There are several different options, and the right choice depends on your individual situation and the objectives you have for the operation of your company. This is an important decision, and it will be helpful to have an in-depth understanding of all of your options before you move forward.
Types of business structures
Two of the most important considerations when choosing a structure type are to factor in long-term goals for the company and if there are multiple partners starting the business together. Some of the specific types of business entities you may want to consider include:
- Sole proprietorship — This is a company run by just one person, and it is a relatively simple structure. The owner is personally liable for any business debts.
- Limited liability company — This is a business that combines aspects of a partnership and a corporation. There are limits to an LLC owner’s personal liability for business obligations.
- Partnership — This is an option when there are two or more people starting a business together. Each partner will share personal liability for business-related debts.
- Corporation — A corporation is a legal entity, and its charter limits the scope of its activities. In a corporation, stockholders are not personally liable for business debts. These businesses pay taxes on both profits and capital gains.
An assessment of your business plan with an experienced attorney can help you understand the options you have regarding business formation.
A strong foundation
The choices you make now will make a difference in your company for years to come. If you are starting out, there is significant benefit in working with an attorney who can help you make choices that will make sense long-term. Before you make choices that can impact your future, consider seeking knowledgeable legal counsel and support in the formation stage.