Which Business Type Is Best For Me?

Sole-Proprietorship

Sole-Proprietorships are typically one person businesses that do not register with the state. There are more than 22 million sole-proprietorships in the U.S. Here is how to form one:

  • Decide to become a business. There is no formal application to submit. As long as there is one owner, the sole proprietorship exists.
  • Choose a Name. Make a webpage, register your name, or trademark your name.
  • Separate your personal and business assets. Get a separate business bank account, business credit card, find a recordkeeping solution.
  • Be prepared to pay self-employment taxes.
  • Obtain insurance.

It is very simple to start this type of business, but also very risky. As a sole proprietor, the business owner has absolutely NO personal liability protection and could be personally exposed should anything go wrong within their business.

Partnership

Partnerships form when two or more people join together to create a business. There are two types of partnerships: general partnerships and limited partnerships. Here is how they are created.

  • Select your partner(s) and the type of partnership needed.
  • Write a business plan.
  • Choose a name.
  • Know your tax obligations.
  • Get a federal employer identification number.
  • Get all licenses and permits.
  • Choose a location of operations.
  • Obtain insurance.
  • Create a partnership agreement.

LLC (Limited Liability Company)

An LLC is a flexible business enterprise that provides limited liability to its owners, blending elements of a partnership and corporation. The following are the steps to setting one up.

  • Choose a business name that complies with your state’s LLC regulations.
  • File all legal forms (articles of organization), and pay all filing fees.
  • Create an LLC operating agreement. This describes the rights and responsibilities of LLC officers and members.
  • Conduct an organizational meeting to document who the officers, governors and managers are as well as their authority.
  • Create a subscription agreement to document who the owners are and what they contributed in exchange for membership.
  • Issue Membership Certificates and create a Membership Ledger.
  • Depending on your state, you may have to publish a notice of intent.
  • Obtain any licenses and permits needed for your specific business.

Corporation

corporation is a business entity that operates as a separate legal entity to provide protection against liability for its shareholders and owners. Here is how to form a corporation:

  • Choose a name.
  • Select a board of directors.
  • Complete articles of incorporation and file with secretary of state or required department.
  • Create corporate bylaws.
  • Conduct the first meeting with the board of directors and appoint officers.
  • Create Stock Subscription Agreements establishing the value of the shares, the classification(s) of the stock, how many shares the corporation is authorized to issue, who the Shareholders are and the amount they subscribed in exchange for their shares.
  • Distribute stock certificates to corporate shareholders and owners.
  • File your tax status with the IRS (C-Corp, S-Corp, etc.).
  • Obtain any licenses and permits needed for your specific business.

Business Formation With Safe Shield

We encourage you to learn more about what we provide within our Business Formation System, or schedule a phone call with one of our experts.