Forming a new business is partly a giant leap of faith, but it can also require many carefully considered legal decisions as well. One of the first things a Newport entrepreneur needs to decide is which type of business they would choose to establish.
The type of business a person chooses to establish has an influence on all of their business operations, from taxes and accounting to personal liability. The five main types include:
- sole proprietorship
- limited liability corporation (LLC)
A sole proprietorship is one of the simplest and easiest types of business to create. The founder would need to register locally, and a business license or permit may be necessary depending on the industry. Liability is a main consideration. A sole proprietorship has unlimited liability which means they are solely responsible for all business activity, including debt. Even if the owner creates a business plan and registers the business in a different name, the business owner and their business are one in the same.
A limited liability corporation (LLC) combines features of corporations with sole proprietorships and partnerships. They have limited liability and are also a pass-through entity making them have a less formal business structure than corporations.
A partnership allows two or more people to start a business together and is the simplest business form to do this. Each owner has an equal stake in the company and to share the liabilities. Partnerships are pass-through entities, and all partners need to claim company profits on their tax returns.
A legal professional who is skilled in Kentucky business law can help their client understand the different types of businesses and what may be right for their situation. They know there are many things to consider when starting a business including liability, tax implications, cost of establishing a business, local and state laws and investors. They have experience in creating companies and making sure they are set up successfully.