Whether it’s turning your favorite hobby into a business, leaving the corporate world to set up your own shop, or searching for investors to build your own manufacturing facility, one of the first steps any business owner should take is choosing the correct entity to form their business. This important step is easy to overlook or push off until a later date, however, by making a plan at the beginning of your business journey, you can save time and money while protecting yourself and your assets.
What are the options you should be considering? There are a variety of business entities to choose from and each have their strengths and weaknesses. The most common business entities are:
- Corporation – A corporation is an entity that is owned by one or more shareholders. A corporation is liable for its own debts and obligations. Typically, shareholders are shielded from liability of the corporation (there are exceptions shareholders in a corporation should be aware of before joining as a shareholder). Management decisions of a corporation are typically made by a board of directors and officers such as a Chief Executive Officer.
- Limited liability company (LLC) – LLC’s are entities that are owned by one or more members. An LLC offers its members protection from the debts and obligations of the company, similar to a corporation, while also offering flexibility in taxation. An LLC can either be managed by the members, managed by a manager, or managed by a board, depending on how they are set up.
- Partnerships – Businesses can be a partnership when they have two or more owners. They can be setup with a general partner in charge while limited partners are less involved, or with multiple partners sharing the powers and responsibilities of running the company. Partnership agreements typically outline the specific responsibilities and detail how decisions will be made. The most common partnership entities created today are forms of “limited liability” partnerships which utilize similar liability protections to corporations and LLCs.
The needs of each new business present unique and challenging questions regarding governance, operations, finances, and taxation. By confronting these issues from the onset of your business endeavor, you set yourself up for long term success. The entities listed above are just a few of the options available to you, consulting with a legal professional can help provide protection and confidence entering the business marketplace. If you would like to discuss a new business and which entity would best be suited for you, then please reach out to attorney Ben Ziemann or another attorney with Bridge Law Group to schedule a consultation.
BRIDGE LAW GROUP, LTD.
Benjamin J. Ziemann | Attorney (Minnesota)
2900 Washington Avenue North | Minneapolis, MN 55411-1630
Direct: (763) 201-1219 | Cell: (715) 210-6552| Fax: (763) 201-7899
Ben@bridgeattorneys.com | www.BridgeAttorneys.com
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