What You Need to Know About Business Entity Formation
Often, when just starting out, a small business will be more or less a part time venture. At first, most of these ventures are not profitable. Over time, however, a small business may grow and become a profit generating business that an entrepreneur may concentrate on exclusively. At some point, however, a small business owner has to start thinking about protecting the investment they have made in their business. The best way to protect business assets is to form a business entity.
Business owners who are the sole proprietors of their business are vulnerable to liability to an unlimited degree. Of course the term ‘unlimited liability’ needs some clarification. The term unlimited liability means that a business owner can lose much more than their business assets if their business fails. This can include personal property, like your home or other valuable property in some states. It is for this reason that business entity formation is so important.
After figuring out the importance of business entity formation, you will then need to figure out which kind of business entity is right for your company. A number of different business entities are available, each of which will protect a proprietors assets in a number of different business situations. Business entities include corporations, limited partnerships (LPs), limited liability partnerships (LLPs) and 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. The reason why LLCs are popular is because they are basically like partnerships in the way they are structured, but provide protections like those of a full corporation. When you get an LLC, you have to first apply for it with your state comptroller. After being granted with your LLC, you will be given a tax ID number from your state comptroller.
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Any small business owner who is interested in learning more about the asset protections that are available from business entity formation should begin by speaking to a business attorney about the process of forming a business entity. By discussing your situation with a business attorney, you will be able to find out everything you need about business entities to protect your assets in the most effective manner possible.
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. All you need to do to get started is perform a search using your preferred search engine for business entity formation or a business attorney working in your area.