• Choose the right structure for your new business.business plan 2 image by Kelly Young from Fotolia.com
  
  Among the myriad decisions that go into starting a new business, the form or structure the business will take is among the most important. Your business's form will determine your and your investors' personal liability, your tax liability, how your ownership will be defined or limited, who may or may not invest with you and how much paperwork will be required to fulfill local, state and federal government regulations. Fortunately, you can tailor your structure to meet your unique needs.
  
  

Sole Proprietorship

• The sole proprietorship is the easiest business structure to form. Simply hang out your shingle, and you're done! The sole proprietorship will be treated just as if it were you personally--you will incur all debts and liabilities personally, and the business's income will be taxed as your personal income. There are no government paperwork or filing requirements for sole proprietorships, and they can literally be started the minute you decide to begin.
  
  

Partnership

• Partnerships consist of two or more individuals who agree to form a business together. Like sole proprietorships, partnerships offer no protection from personal liability--the partners will be responsible for any debts or judgments the partnership incurs, and all income is taxed as personal income rather than being taxed separately. Partnerships also require no legal filings or reporting and are not required to hold meetings or keep minutes.
  
  

C-Corporation

• The C-corporation is formed by filing articles of incorporation with your state. All owners hold shares of stock, which may be transferred or sold at will. The C-corporation does limit personal liability for the company's obligations, so you are not personally liable for your company's debts. Only the money you invest in the company is placed at risk. C-corporations are required to hold annual shareholder meetings, maintain minutes and corporate record books, and are required to file annual reports in their state. Income is taxed separately from individual income.
  
  

S-Corporation

• The S-corporation varies from the C-corporation in only one respect: Instead of business income being taxed first as corporate income and then a second time when it's distributed to the shareholders, S-corporation income is passed through to its shareholders directly, so that it is taxed only once as personal income for the share holders. All C-corporation requirements are also required of S-corporations.
  
  

Limited Liability Corporation

• The Limited Liability Corporation is a hybrid form of business combining the personal liability protections of corporations with the tax benefits of sole proprietorships and partnerships. The number of share holders in an LLC is unlimited (unlike an S-corporation), and active participants in the business enjoy special privileges and tax benefits not available to the other corporate business forms.