Perhaps you have a brilliant idea for a new business and you are ready to make it happen in Arizona. As you move forward with your plans, one of the most important decisions you will make is choosing the best business formation.
The type of business structure you select will impact many aspects of your business, including taxation, liability and management. Here are some things to consider when deciding on the best structure for your business.
Sole proprietorship or partnership
If you are the only owner of your business, you might consider operating as a sole proprietorship. This is the simplest type of business structure and it gives you complete control over your business. However, it also means that you are personally liable for all the debts and obligations of your business.
If you are starting your business with one or more partners, you could consider forming a partnership. A partnership allows you and your partners to share in the profits and losses of the business. However, partners in a general partnership are personally liable for the business’s debts.
Corporation or limited liability company
With either a corporation or a limited liability company, you are not personally responsible for the business debts and obligations. A corporation has a complex structure and is subject to more regulations and reporting requirements. Shareholders own it, a board of directors manages it and officers operate it.
An LLC combines aspects of both partnerships and corporations. It offers limited liability protection and is easier to manage than a corporation. In an LLC, profits and losses can pass through to the owners’ personal income without facing corporate taxes.
By understanding the advantages and disadvantages of each type of business, you can make an informed decision that suits your business needs. Remember, the right business structure will not only protect your personal assets but also support your business as it grows and evolves.