One of the most crucial decisions you will make as you plan to start a new business is the type of entity you wish to form. With so many options, it can pose a challenge to wade through all of the advantages and disadvantages in order to make a choice.
Even though you need to make this decision before you open your doors (so to speak), you may want to have other aspects of your business lined up before you choose. The entity you decide on needs to help your business flourish, not weigh it down in any way. In addition, it's important to consider just how much personal liability you are willing to take on for the company.
Have you considered forming a corporation?
Other entrepreneurs that you know may settle on a limited liability company, a partnership or even a sole proprietorship. However, if your aspirations are big, those entity choices may not provide you with the benefits you need, such as the following:
- Clear separation of management and ownership
- More options to raise capital
- Easier ownership transfer
- Personal protection from liability
If these benefits sound good to you, a corporation may be your best option. Whether you choose a C-corporation or an S-corporation depends on several factors, including the fact that you are limited in the number of investors you may have for an S-corporation. Before making the choice, it would be a good idea to understand all of the possible ramifications.
What are the downsides of a corporation?
Every entity type has what some Louisiana entrepreneurs would consider downsides. For a corporation, this often involves the legal paperwork requirements that you must meet in order to keep the corporation in good standing with the state and to reap the rewards. The paperwork and other requirements include the following:
- Articles of incorporation
- An employer identification number
- Payment of fees and taxes
- Fictitious name registration
You will also have annual requirements to meet. The time and cost associated with a corporation are two of the main reasons why many people opt for a different type of entity. However, if it suits your business model best, then incorporation may be worth the challenges.
Be sure you do it right
One of the biggest obstacles that many entrepreneurs face involves incorrectly setting up their business entities. A mistake could end up denying you the benefits of a corporation, such as limited personal liability or the tax considerations. It may behoove you to get help from an experienced business law attorney who can provide you with the advice and assistance you need to get your business off the ground and headed toward success.