If you are an aspiring business owner, you may have recently begun to research how the business formation process unfolds in the state where you intend to start your company. Although each state employs different formation procedures, all states offer the same primary business structures for entrepreneurs and small business owners to choose from.
Generally speaking, business owners can opt to form their companies as sole proprietorships, partnerships, limited liability companies (LLCs) or corporations. Many states offer some hybrid versions of many of these broader structures but the four key formation types remain constant across the U.S.
Many entrepreneurs who want to expand quickly and build an empire opt for corporate structures. Local business owners who want to avoid fuss during the startup period may opt for sole proprietorship or partnership structures. Yet, the most popular business formation structure available – regardless of industry and business type – is the LLC model.
Embracing a “middle ground” approach
The primary reason why new business owners opt for LLC formation over other structural options is that it serves as an effective middle ground between the poles of corporations and sole proprietorships/partnerships. Like corporations, LLCs offer personal liability protection and tax-related flexibility. Like sole proprietorships and partnerships, the managerial structure of LLCs is flexible, there are few steps to the formation process and few reporting requirements.
With that said, an LLC structure is not right for every business-related vision. As a result, it is generally a very good idea for aspiring business owners to seek legal guidance before committing to one structural option over another. That way, they can make truly-informed decisions that reflect what they both need and hope in re: the launch of their new companies.