How much does the form you choose for your business matter? It is one of the most significant decisions you will make for your business because it informs just about every decision you make thereafter.
Can you change your mind after you choose a business form? It depends on what you choose. Some are easy to change, but there are others you cannot change, at least not without a lot of time and expense. Therefore, there are some things you should consider carefully before choosing your business form.
1. Control over operation
If you are willing to share responsibility for running the business among several different people, you may want to consider a partnership, a corporation or a limited liability company. On the other hand, if you want complete control, you may want to choose a sole proprietorship instead.
2. Personal liability
With total control also comes a risk that you could be personally responsible for business debts, meaning that creditors could take assets unrelated to the business to satisfy them. This is a risk with sole proprietorships and general partnerships, while corporations and LLCs limit liability to offer more protection.
According to FindLaw, corporations must disclose information to the state for release to the public. If you are comfortable with this, a corporation may be a good fit. However, if you want to keep your business matters private, consider a general partnership or a sole proprietorship. Even an LLC would afford you more privacy than a corporation.
There are also matters of cost and ease of setup to consider. It is easier and less expensive to set up one of the simpler business forms, while the more elaborate ones require more time and money from you upfront.