What You Need to Know About Business Entity Formation
In the beginning, many small business ventures start out to be little more than part time work. These ventures are not very profitable at first. After a while it becomes apparent that the business is stable and profitable, able to generate significant profits. For many business owners, the question soon becomes how they can protect the business assets that they have gained as their business has grown. If you want to protect your business assets, the easiest way to do so is through the process of business entity formation.
Business owners who are the sole proprietors of their business are vulnerable to liability to an unlimited degree. For many people, the term ‘unlimited’ may require some explanation. The term unlimited liability means that a business owner can lose much more than their business assets if their business fails. Depending on your state, a sole proprietor can even lose their personal possessions if their business fails, including their home and other valuable property. It is for this reason that business entity formation is so important.
After deciding that you are going to form a business entity, it is important to figure out which type will best serve your needs. Several different types of business entities exist that are designed to organize and protect a proprietor’s assets according to their specific needs. Included among these business entities are corporations, limited partnerships (LPs), limited liability partnerships (LLPs) or limited liability companies (LLCs). Through business entity formation, a sole proprietor may reap a number of important advantages.
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Today, the most common type of business entities formed are LLCs or limited liability companies. Limited liability companies are the most popular option among startups because they are well suited to small businesses, but offer the same kind of protections that you would get from a corporation. The process of getting an LLC consists primarily of applying for it through your state comptroller’s office. Once the application process is complete, you will end up receiving a state tax ID number from your state’s comptroller office.
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When you are the sole proprietor of a small business, or you have gone into business with a partner, you should certainly speak to a business attorney to find out more about forming a legitimate business entity. Discussing your situation with a business lawyer is sure to help you figure out the best way to protect all of your business and personal assets.
The laws governing business liability are different from one state to another, making it important to ensure that you get in touch with a business law attorney in your state to ensure that the advice you get about forming a business entity is as accurate as possible. To begin, all you have to do is perform a search engine search for a local business attorney, or search the web for information about business entity formation in your area.