Mind Your Business: Part 1 – Entity Selection
Starting a new business is one of the most exciting and fulfilling professional experiences a person can have. It is also nerve-wracking, emotional, and sometimes downright scary. The purpose of this three-part series is to provide a basic understanding of the process so you and your attorney can focus on how to best meet your specific business goals. Part one discusses selection of a business entity; part two provides an overview of initial financing and capital structure; and part three discusses agreements founders may want to have among themselves. There are a number of options that may be available to you when forming your new business. It is helpful to have a basic understanding of the different entities as you begin planning your future business. A qualified attorney can explain in detail how each entity structure would affect your particular business. The Sole Proprietorship A sole proprietorship is not actually an entity at all, but is often referred to when discussing business structures. A sole proprietorship means that the owner of the business has full liability of the company. Sole proprietorships are easy and cost effective, but there is no protection for the sole proprietor for any debts or liabilities of the business. Thus, this structure is only advisable where the company has little liabilities,…