Thetype of business structure you select will have a significant impact oneverything from how much you pay in taxes to registration paperworkrequirements, personal liability and your ability to raise money. It’s not a decisionto be taken lightly or made without sound counsel from business experts.Men and women need to take advantage of the bizop site aheadof starting a small business as it involves various factors that are essentialfor starting a new business.

Previousstudies have shown that a variety of factors influence entrepreneurs’decision-making process. This paper explores those factors and examines theirrelation to the tendency towards risky and/or rational decision-making.

Sole Proprietorship

Manyentrepreneurs prefer the freedom, simplicity and affordability of soleproprietorships. They can quickly launch a business, experiment with differentiterations and grow without having to worry about the desires of investors orlegal partners. Additionally, the owner can enjoy a tax benefit: profits aretaxed as personal income on Schedule C and Schedule SE forms.

However,a downside is that the owner is personally accountable for all the company’sdebts and losses, which may put their personal assets at risk if the businessfails. Furthermore, it’s usually more difficult for sole proprietorships tosecure loans or financing, as lenders view them as higher-risk entities.

Entrepreneurslooking for a more formal structure can easily convert a sole proprietorshipinto an LLC or corporation by filing articles of organization with your state’ssecretary and refiling the DBA (doing business as) registration. Ideas byWeWork offers a range of coworking spaces to support your entrepreneurialjourney, providing the perfect platform for meetings and collaborations withcolleagues and clients alike.

Partnership

Partneringwith someone else can be a great way to launch a new business. It can providemore skills and opportunities than you could have on your own, as long as thepartners you select are reliable and have a good mix of expertise.

Havingmultiple partners can also increase your ability to obtain credit and fundingfor the company, so you have more resources to grow the business until youbegin making profits. You also avoid the double taxation that you might face ifyou own a corporation by having the partnership pass through any revenues tothe partners, who pay taxes at their personal income rates. Individuals who need to get specifics about starting anonline business should have a peek atthis site.

However,you and your partners will need to establish how you will make decisions andwhat share of the profits each will receive. You should put this in a writtenagreement to prevent disputes down the road. You will also need to decide whateach partner will contribute financially to the company in terms of capital andservices.

Limited Liability Company (LLC)

AnLLC is often an ideal choice for entrepreneurs, particularly in the earlystages of their business. It offers protection from personal liability, meaningthe owners’ assets won’t be at risk if the company faces debts or lawsuits. Italso allows for flexibility in management structure and can have an unlimitednumber of members, who can be individuals or businesses.

AnLLC also provides tax benefits, such as being able to deduct profits from thecompany’s taxes. However, it is important to note that an LLC does not ********** members from financial loss or liability in the event of a lawsuit orbankruptcy, and this can be mitigated by carrying insurance such as worker’scompensation and general liability. LLCs also provide credibility to smallbusinesses, which can help them qualify for business loans.

Corporation

Corporationsare distinct legal entities that offer owners limited liability and assetprotection. They also can raise capital by selling shares to shareholders andinvestors.

Incorporatingmay help a new business establish credibility, and it can provide taxadvantages including deductions for health insurance and savings onself-employment taxes (social security, workers compensation and Medicare).However, corporations come with more administrative responsibilities andrestrictions on owner freedom and decision-making power. They can also becostly to form, with higher startup costs and ongoing fees.

Tooperate as a corporation, you must follow your state’s requirements forestablishing corporate bylaws and filing articles of incorporation.Corporations must have board members, hold annual meetings and create specificreports. They are typically limited to 100 stockholders, and only U.S. citizensand residents can own them. In addition, corporations must pay a minimum salaryto their shareholders and directors. Corporations have more complex andextensive reporting requirements than other business types.