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If you want to formalize a
new business entity or even an on-going entity, the parties need to
consider some important issues to determine which type of entity to
become. Traditionally, the typical entity was a corporation,
partnership or sole proprietorship. Corporations are even further
divided into the standard corporation and a S-corporation. Changes
in a variety of laws have created a relatively new entity called a
limited liability corporation. This entity has a long history
overseas but has recently come to become more common since the
mid-1990s. |
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To form a
company, you need to decide the following:
1. How many people will operate
the company?
2. Will all of the
operators have equal decision-making authority?
3. Is the entity formation driven
by the operators’ desire to shield their personal assets
from
creditors in the event of an problem?
4. Do the operators want to be
tied into issuing stock or is more flexibility needed to
determine
who will manage the entity?
5. How
much investment do the operators want to make in forming the company?
6. How do the operators want to
be paid, in profits, stock, or other compensation?
7. How much risk are the operators
willing to assume?
8. How much
complexity do the operators want to accept in forming the entity?
9. What are the personal tax
issues the operators have to consider?
10. What industry is the entity involved
in?
Talk
to any two attorneys and/or any two accountants and the entity that is
right for you will never be the same. So, to provide an answer as to what
entity is right for you depends entirely on the answers to the above
questions. We offer a free one hour consultation to discuss your answers
to these and several other questions. You should also be prepared to
consult with an accountant to answer what personal
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