Starting a business, growing a business, adding co-owners, winding a business down: these are all situations in which issues about business formation may arise. Each form of business organization, sole proprietorship, partnership or incorporation, has its own pros and cons.
The simplest form of business organization is a sole proprietorship: one person carrying on business alone. While a sole proprietorship is relatively easy to set up, whether this form of business organization is appropriate is often a complicated issue that involves tax considerations and business risk considerations. In some cases it may be that it would be beneficial for a sole proprietorship to incorporate in order to maximize tax benefits or minimize personal liabilities.
When two or more people carry on business together, they will have a choice of forming a type of partnership or incorporating. When considering a partnership, serious issues of personal liability of each partner for the partnership debts need to be considered along with tax and business risk considerations. While the basic idea of a partnership is fairly well understood, in some cases a specialized form of partnership, such as a Limited Partnership or Limited Liability Partnership may be appropriate for your needs. Again, in some cases it may be more beneficial for partners to incorporate their business venture.
Incorporations, while being the most costly of business organizations to create, organize and maintain, also provide the most versatility in being structured for tax and liability purposes. In many cases, they may be the best choice for an individual or partners starting a business or they may be the logical choice as a sole proprietorship or partnership grows. When setting up a corporation, there are many issues which should be considered, such as share structure, management and capitalization.
We are happy to assist you in determining the business formation that meets your requirements and assist you in moving from one form of business to another as your business requirements change. In addition to assisting you with the formation of your business, we are also capable of providing you with advice on partnership agreements or shareholders’ agreements and in annual corporate maintenance/resolutions.
Should you have any questions about this area of law, please feel free to contact us.