When a new business owner or entrepreneur wants to start a new business
or purchase a business
, most often the initial consideration is whether to incorporate the business or decide what unincorporated business entity will best benefit the business’ needs. Deciding what business organizations
, such as a sole proprietorship, general partnership, limited liability partnership, or limited liability company, or as a corporation depends on various tax and other factors and considerations. For example, some businesses simply cannot be incorporated, while other businesses, like banking and insurance institutions, must, by law, be incorporated. On the other hand, clients involved in a wide range of business activities, can generally choose the form of business organization that best suits the business’ ownership and operational structures.
Business organization decisions involve tax considerations, the degree of individual liability, and the amount of control an individual wants to maintain over the business. For example, in a business organized as a sole proprietorship, the business is the individual as far as the law is concerned. That individual has full control and authority over the business but he or she also assumes unlimited liability for all debts and responsibilities incurred by the business. In a sole proprietorship, the business is taxed as an individual.