The Common Types of Business Formation

 

Most Common Business FormationWhen you are thinking of starting a business, you may reflect on the business name, logo, branding, services, prices, and all the other components that make up your company’s model. But what about the formation of the business itself? Too many people overlook the importance of business formation. Choosing the right one for you can mean the difference between success and financial chaos. Here are the most common types of business structure for you to consider.

Sole Proprietorship

This is the simplest way to set up your business. There is nothing that you have to file with the county or state; you can just start your business. However, there is no protection for a sole proprietorship either. Any lawsuits against your business mean that your personal assets are at risk. If you are in an industry where the risk of lawsuits is high, it may be worth it to organize your business under a different type.

General Partnership

A general partnership, like a sole proprietorship, is easy to set up and requires little to no paperwork. However, it still doesn’t provide any protection for your business. The difference is that you may be liable for the business decisions of your partner. If your partner decides to make a large purchase in the name of the business, you could be responsible personally for that purchase, even if you didn’t sign anything. With general partnerships, it is advised that you have a written contract laying out your roles and liability you take on.

Limited Liability Corporation

This type of business formation is one of the most popular and for good reason. It is easy to start and typically only requires a bit of paperwork. As an owner, your personal assets are protected if a lawsuit is filed against the corporation and it is commonplace to have an operating agreement laying out the terms of any partners you may have.

There are many other types of ways to form a business, if you have any questions regarding how to set up your company, contact Lucé Law Firm, P.C. Call 972-632-1300 to schedule your appointment with us today.