Selecting the most appropriate form of business entity is one of the most important early decisions an entrepreneur faces. The five most widely used forms of business organizations are sole proprietorships, general partnerships, limited partnerships, limited liability companies and corporations. In addition to these entities, specialized business organizations, such as joint ventures, professional corporations, limited liability limited partnerships and business trusts are sometimes used.
The choice of entity affects fundamental matters of the business and has far reaching implications. The initial decision will usually be determined by considering some or all of the following characteristics in light of the particular concerns of the owners and the anticipated needs of the business:
- Tax treatment of the entity, its owners and its employees
- Anonymity of ownership and asset protection
- Formation expenses
- Limiting the owner’s obligations for the entity’s liabilities
- Restricting the transfer of ownership interests in the organization
- Enticing future venture capital financing or other forms of outside investment, such as angel investors
- The obligations of board of directors and management to the company’s owners and creditors
- Rules relating to deadlocks in the management of the entity
- Rules relating to dissolution or termination of the entity
- Regulatory considerations
We typically work with not only the new business owners but also a certified public accountant to review these and other important preliminary considerations for the venture. This process helps our clients to decide on the most appropriate form of entity, implement asset protection and preservation mechanisms, prepare for future venture capital financing, and reduce the possibility of future disputes with any other owners. Thus, the business will be properly positioned for long-term success.
Rutledge & Yaghmai has the knowledge and business experience to go with you each step of the way as you create, develop, implement and move your business forward.