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Deciding the best formation for your business

You have a product or service and are ready to leave your nine to five and become your own boss. The world of entrepreneurship is a sometimes rewarding and often brutal road to success by your own terms. You've done your homework and cornered your market but still may have questions about how to formally set up your business.

When forming a business, you will need to choose one specific organizational type for the business. The majority of businesses fall within one of four structures. These are:

  • Corporation.
  • LLC.
  • Sole proprietorship.
  • Partnership.

There are pros and cons to each type. It may be a good idea to weigh the expense of maintaining the established type as well against the potential expense of accountability if your company is high-risk. For instance, if your company is low-risk and you are selling reading material, it isn't likely that you will be held liable for someone's injuries. Therefore, you may benefit from either a sole proprietorship or a partnership. This is the less-expensive way of establishing your business

 

If your company is high-risk, a partnership or sole proprietorship would be less cost-effective if you or you and a partner were held personally responsible in a lawsuit over an injury. This is when it makes more financial sense to form your business as a corporation or LLC. This may cost more to establish and maintain in comparison, but in a worst-case scenario, you may be thankful that financial responsibility is limited for you personally.

When you are forming a business, there are many factors to consider and sometimes the help of a knowledgeable business litigation attorney may be invaluable. Your Florida business attorney can explain in greater depth the different organizational types of businesses and also let you know when it may make sense to graduate from one type to another.

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