When registering a business, you need to decide what form of business you want to operate. For example, is your business a partnership, a sole proprietorship, or a limited liability company? The form you choose during registration has far-reaching legal ramifications for your business. For example, it may determine whether your business's creditors can hold you personally liable for their debts or not.
This is why it's a good idea to consult a small business attorney before starting a business. The lawyer will help you understand the legal aspects of all these forms of businesses and help you choose the best one for your case. The lawyer will do this by discussing these factors with you:
Control of the Business
One of the things the lawyer will discuss with you is who you want to be in control of the business. Do you want to make all the decisions, or are there other owners of the business that you will be consulting? For example, the best way to ensure you are solely responsible for your business's decisions is to make it a sole proprietorship.
As previously hinted, there are cases where a creditor can sue you as an individual to recover loans that your business has defaulted on. There are also cases where a creditor is legally restricted to dealing with your business and they can't come after your personal finances. Again, which route you take will determine the form of business you can register.
If you already have the capital for your business, where did you get it? And if you haven't raised the capital, how are you planning to do it? Are you planning to take a personal loan, get contributions from your business partners, or ask money from your family members? The manner in which you are raising capital also decides the form your business takes because it determines whether you are the sole owner of the business or if you only own a share of it.
In this context, conformity is the degree to which a business is required to follow state laws governing the kind of business you are running. There are some businesses with strict laws that every business owner must follow to the letter (strict conformity), but there are also businesses where the law gives you a little wiggle room on management matters. The lawyer will discuss with you these issues in detail.
As you know, every business is supposed to pay taxes, but they don't all pay the same taxes. Your business's designation is one of the factors that determine your tax obligation. Therefore, you need to understand the tax obligations of each type of business to ensure you know what you are getting into before registration.