6 Different Ways To Form A Business




When starting a business, you must decide what form of business entity to establish. It is also important to have a good business lawyer . A good business attorney will provide dynamic assistance in almost every aspect of your business, from basic zoning compliance and copyright and trademark advice or lawsuits and liabilities.




Business owners who become a sole proprietor are in full control of their businesses. As the business grows, the business owner might look into forming partnerships, corporation, or limited liability company.


As a sole proprietor, it is generally easier to start up, Profits and losses flow through the owner and they have unlimited liability of the business debt. Entrepreneurs who want to start a corporation have to know which type to form. They are three different types which are C corporation, S corporation and Limited Liability Company, LLC




While starting an S corporation, the limitations on ownership are 100 or fewer owners with certain trusts. They do not pay corporate taxes but they transfer income, deductions, losses and credit to their shareholders as distributions


Starting a C corp, owners have limited liability as they are generally a larger entity. They are not personally liable for business debt but can be liable as a result of fraud or negligence they commit. There is a double taxation of income, corporate income tax and dividend income taxable to recipients. Double taxation can be avoided if corporate income is retained or reinvested rather than distributed as dividend or corporation pays owner a salary or bonus rather than dividends. It is typically easier in transfer-ability of corporate stock as opposed to S corp.



While forming a limited partnership, it requires filing certificate of limited partnerships.Limited partners are generally not personally liable and may lose governance right as to certain very limited matters. In a limited partnership, profits and losses are shared in proportion to partner’s respective capital contributions . There are two types of partners, at least one general partner and one limited partner.


Forming a general partnerships exists by default when 2 or more people go into business together. Daily management and power to bind a limited partnership generally reserved to general partners. In a general partnerships, profits are shared equally among partners, regardless of differing contributions. Losses are shared in proportion of sharing. The general partners are personally liable for partnerships debts.



Important factors to consider while selecting a state while forming a LLC are

cost of forming, and doing business, flexibility and disclosure required under the of the states LLC statute, and where the primary business will be conducted.



Consider what type of business business entity you are forming, and if it is right for you. Be sure to have an attorney for your business to protect you from the law.


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