Choosing a Form for Your Business

Business enterprises can be set up in a variety of different forms including:

• Sole proprietorships
• Partnerships
• Corporations
• Limited Liability Companies

Each form of business entity has unique advantages and disadvantages. One of the most significant considerations in choosing a form of business entity is how the business entity is taxed.

Businesses can generally change their legal structure after they are formed. However, changing the form of the business entity sometimes causes tax liabilities to the business or its owners that could have been avoided by initially choosing the best business form. Therefore, when establishing a business, deciding on the form of business entity is one of the most important decisions a business owner can make.

The choice of a business should be made in consultation with an attorney, accountant, or other competent business adviser. These professionals can also, within their respective professional areas, provide important services in:

• Negotiating agreements among participants in a business venture
• Preparing a business plan
• Advising on the requirements of various statutes