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What should you consider when picking a business form?

On Behalf of | Nov 3, 2021 | Business And Corporate Law

Starting a new business in Michigan is exciting but challenging. One of the most challenging aspects can also be the most essential: choosing the form or structure that your company will take.

You have many choices in this regard, including a partnership, a sole proprietorship, a corporation or a limited liability company. There is no one structure that is inherently ideal. Rather, according to FindLaw, a number of variables come into play to determine which business form will work for you. Therefore, there are many aspects that you need to take into consideration. What follows are just a few of them.

Cost versus risk

Some business structures, such as corporations, cost a lot of money upfront to establish. Others, like general partnerships and sole proprietorships, cost almost nothing to set up. Therefore, if you have little in the way of startup costs, a sole proprietorship or partnership may be a better option.

However, an inexpensive business to start now could end up costing you later. The more expensive businesses to start, such as corporations or LLCs, also provide you personal protection from business liability. If you do not have this protection, you could end up paying business debts out of your own pocket.

Ease versus operation

In addition to being inexpensive, it is also relatively easy to set up a sole proprietorship. Keep in mind, however, that in a sole proprietorship, the responsibility for running the business falls only on you. This gives you a great degree of control over operations but may also take a personal toll. If you do not wish to bear this burden alone, forming a partnership, an LLC or a corporation allows you to bring in other associates to lighten the load.

The information in this article is not intended as legal advice but provided for educational purposes only.