If you are considering opening a business, you may wonder about how to legally set it up. There are various forms of businesses and each type has some benefits. Before you create your business, you should learn about the different types of businesses and consult with an attorney. Your lawyer will assist you in choosing the entity that is best for your purposes and will guide the process to make sure you complete everything properly. A business is also called an entity. There are several main business entity types to choose from when you open a business in Wisconsin.
Corporation
A corporation offers some important legal protections against liability. The owners have a limited liability for the business’s activities, specifically debts. A corporation is helpful to establish a structure that includes directors and officers. The corporation is particularly attractive to large businesses because you can provide stock options and benefits. A corporation is a popular business structure when you want to include investors in your company.
Corporations are more complex and require more time and expense at the start. Corporations must operate within the law and have to follow the required formalities such as holding meetings and keeping records. There is a potential for tax liability for larger corporations when dividends paid to stockholders are taxed. You may choose to file as an S corporation, which follows specific IRS tax guidelines that might be more beneficial.
Partnership
A partnership is a company structure that includes two or more individuals. In a partnership business entity, the partners report business profits and losses through their own tax returns. Each partner is still responsible for the company’s liabilities. A partnership structure can protect you from personal liability for your company. There are several types of partnerships.
- General Partnership
- Limited Partnership
- Limited Liability Partnership
Partnerships are easy company structures to maintain, however, there are some critical decisions that you must make up front in order to ensure the best results. When you partner with others you will have more support and input into ideas and decisions. One of the drawbacks of the partnership is that each person is responsible for profits and losses. Partnerships can be more challenging to keep going when one party leaves. Partners may disagree about business issues, making it difficult to smoothly run the company.
Sole Proprietorship
A sole proprietorship is a company that is owned and operated by one person. As a sole proprietor, you will make all the decisions and will gain all the profits of the company. At the same time, the owner is responsible for any debts or losses that the company incurs. One potential downfall of a sole proprietorship is if you get into financial trouble, you could end up losing your personal assets or property. If you decide to begin a sole proprietorship, it is critical that you consult with an experienced lawyer to assist you with the process and to provide you with options that will make business ownership less risky.
Forming a Business
The person or persons who form the business are responsible for determining the type of entity and for providing information to the Wisconsin Department of Financial Institutions. You must fill out and submit the necessary forms along with a fee to register your business. It is best to seek legal guidance throughout the process and for help with all legal aspects of your company. To learn more about business entities and for help with your business, contact Moen Sheehan Meyer online or by phone at (608) 784-8310.