Factors to consider when choosing a business form

Even a cursory look at the corporations website maintained by the Massachusetts Secretary of State suggests complexity. From the choice of a business entity to operations and tax liabilities, there are a patchwork of state and federal laws that apply to businesses.

A law firm that focuses on corporate law can provide perspective to businesses at every step in this journey. When choosing between different business organizational forms, there are many factors to consider, and every client’s unique needs might accord them different weighting.

As background, a business form can result in different costs, due to varying complexity. A sole proprietorship is the easiest to form, of course. A limited liability partnership or limited liability company has more procedural requirements, and a corporation is often the most expensive and complicated form to establish. The applicable regulations can be found on the Secretary’s website.

For example, readers may know that general partnerships or sole proprietors generally have personal liability for any taxes or other debts incurred by their business. In contrast, limited liability organizations and corporations grant certain protections to owners and equity investors alike. For that reason, LLPs, LLCs and corporations are generally the preferred forms when a business anticipates the need to raise capital.

Yet choices often have trade-offs. In this case, the owners will have less control over business operations than general partners or a sole proprietor. Our business law firm can provide legal advice regarding entity selection and formation, tax planning, risk avoidance and operational issues. Our attorneys generally advise our clients to consider all factors before choosing a business form. The extra expense and time might be a life-saving investment in the company’s future.

Source: FindLaw, “Picking a Business Form: Ten Things to Consider,” copyright 2016, Thomson Reuters