Choosing The Form For Your Business.

When starting a new business, the first decision to address is choosing the form for your business. The form you select may affect the future transferability of ownership interests, relationships between owners, tax implications to the business and its owners, and personal liability of the owners and investors for the obligations of the business. In selecting the form for your new or existing business, options to consider include:   sole proprietorships, general partnerships, limited partnerships, “C” corporations, “S” corporations, and limited liability companies. For professionals rendering services, options  include professional corporations, partnerships and limited liability companies.

Factors To Consider.

There are many factors that can help to determine which form of business organization is most appropriate for your needs. The following is a nonexclusive list of factors to consider when deciding which form is best suited for your proposed or existing business.

  • Formation requirements and maintenance costs
  • Statutory reporting and record keeping requirements
  • Centralization of management and/or structure
  • Impacts or restrictions on transferring ownership
  • Size, type and nature of the business
  • Income tax implications for the business, owners, investors and employees
  • Availability of limited liability for owners and investors of the business
  • Family matters
  • Makeup and types of owners of the business
  • Projected profits or losses
  • Form of compensation to be paid to the owners
  • Composition of the assets of the business and anticipated future appreciation
  • Different types of contributions made by the owners (cash, property, services)
  • Employee compensation and benefit plans
  • Potential for public or private offerings of securities
  • Estate planning factors
  • Fiduciary duties between parties and owners
  • Treatment of deadlocks in management
  • Ease of dissolution of the entity
  • Difficulty in changing the form of the entity in the future