Excerpt from the "Idea to Product Primer" by David Catt
What structure is your business going to take? Tax implications and personal asset risk are important things to consider when making this decision. Many good books are available on business structures including how to form a corporation or partnership. Also check with your state.
The simplest structure is the sole proprietorship. The is for a business owned by one person. If you have two or more people that own the business, you can form a partnership. These two choices are the easiest to deal with come tax time. Cons involve legal aspects that put your personal assets at risk. Also, in a partnership, you are financially responsible for the actions of the other partner(s). Another form of partnership is a limited liability company (LLC) which is a hybrid between a partnership and a corporation in that it combines the "pass-through" treatment of a partnership with the limited liability accorded to corporate shareholders.
You can also consider setting up your business as a corporation. A corporation is a an entity with it's own life. You become a shareholder by buying stock in the corporation. Yes, there is more paperwork involved in creating and maintaining a corporation. The benefit of a properly formed and maintain corporation is the reduced risk of personal financial responsibility.
There are two type of corporations - C and S. The difference is primarily . . . .
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Starting your own company