By Chesley Payne
Most individuals running a small business are aware of the need to form a corporate entity.
A corporate entity is a fictional legal “person” that is allowed to carry out business without the investors risking their own private possessions in the pursuit of that business. Most people are also aware of a standard business corporation
However, most people are unaware that the law in the past 20 years has greatly expanded a person’s choice as to the type of corporate entity they can choose. Whether you choose to be a limited liability company, limited partnership, limited liability partnership, or professional corporation, each entity has its own strengths and weaknesses, and should be investigated thoroughly with your legal counsel.
While all provide some form of liability protection, some offer more than others. Further, each entity can have its own special treatment with the IRS that can cause unintended tax consequences if you are not properly informed before choosing your type of corporate entity.
I usually inform all potential entrepreneurs that the two individuals you need in your corner prior to starting your new venture are your attorney and your accountant. Each can provide guidance in their area of expertise. Each will be necessary at different points in your business’ growth. While experience is often the best teacher, the lessons you learn can be expensive.
Take the smart path and contact your attorney if a new business is in your future. Often, this small investment in time and money can save you from unnecessary hassle and costs down the road.