Starting a new business is a challenging endeavor, and as an entrepreneur, you could find yourself facing important decisions in the early stages of this process. One of the most critical choices you will make is the selection of a business entity. This is the structure of your business, and it will affect many aspects of your operations. Making the best selection could impact how your company functions and its success long-term.
Your choice of business structure is one of the earliest foundational decisions you will make for your new Minnesota company. It is in your interests to understand the impacts of this decision, as well as the benefits and potential drawbacks of each option available to you. This will provide you with the insight necessary to make decisions that will ensure your success and provide your business with security during uncertain times.
Types of business structures
The entity selection for a business is its legal structure, which determines factors that include taxes, personal liability of the business owner and much more. This decision could impact your own financial interests as well as that of your company, and the right selection depends on factors that include the nature of your daily operations, fundraising needs and more. Types of business entities include:
- Sole proprietorship — This is the ideal choice if you are a solo entrepreneur, and you will be solely responsible for the debts and taxes for your business. This is the simplest option and is very easy to establish.
- Limited liability company — This option limits the personal liability of the business owner while offering some of the flexibility found in a partnership. LLCs are relatively easy to establish.
- Partnership — This is an ideal selection for situations where multiple people are starting a business together. Partnerships are relatively easy to establish, and all partners will share liability for taxes and debts.
These are the most common business entities, but there are other options available to you. It is in your interests to carefully evaluate your situation and determine what will make the most sense for your company long-term. Each business is different, and your goals and plans are unique. This is why you may benefit from seeking the guidance and support of an experienced professional as you are making these choices and navigating the initial stages of starting a business.