If you are planning to start your own Georgia business, you have many decisions to make. You might need to secure financing or investors, decide whether to rent or purchase commercial real estate, and create a marketing plan, among many other things. One of the first things you will decide is what entity type you will operate your business under.
Of course, if you are the owner, operator and only employee, you will probably work as a sole proprietor, at least until you decide to expand the business. However, if this is not your situation, you will have to take a careful look at your goals for your business and choose an entity that best helps you facilitate those goals.
Different benefits and obligations
The choice of a business entity reflects the legal aspects that are most important to you. You may be hoping to protect your personal finances from any liability the business incurs. You could be hoping to reduce your tax liability. You might be willing to share the profits if it means sharing the legal and financial responsibilities. While there is probably not one entity that will perfectly match all your goals, you will want to explore the following common choices and see which one most closely matches your goals:
- General partnership means equally sharing the losses, profits and legal obligations, including tax burdens, with your business partners.
- A limited partnership may have some partners whose involvement in restricted to financial investment.
- Limited liability companies offer protection against many liabilities the business may incur, but they are more expensive and require more oversight.
- An S-corporation also provides protection from the business’ financial or legal responsibilities as well as offering tax benefits, but it carries many legal obligations.
- A C-corporation is quite complex but provides the most complete separation between your personal affairs and the affairs of the business.
To decide which of these or other entities may be the most appropriate for your business, you will first need to consider whether you will benefit from liability protection. Also, each entity has its own complex tax implications that may greatly influence your decision. Some entities require the relinquishment of control of certain aspects of your company in exchange for the benefits they offer.
It is wise to discuss the nature of your business and its goals with your partners and investors as well as obtaining sound legal advice before deciding which business entity is right for your venture.
