This is an area that many people make mistakes in that can cost them money in many different ways. People usually start a business and then decide to change the type of ownership or structure after they have already made mistakes.  In far too many instances, I will get clients in who are operating as an LLC or Partnership, or as a sole proprietor, when another form of ownership would be more advantageous to them taxwise.

One of the first decisions you have to make as a business owner is how the company should be structured.  This decision is very important, because it can have long term implications.  You should consult with an attorney and a tax consultant to help you select the form of ownership that is right for you.  I would recommend talking to the tax consultant before you see the attorney, who will help you to structure the business.  In making your choice, you should consider some or all of the following:

Your vision regarding the size and nature of the business.

The level of control you wish to have.

The level of structure you are willing to deal with.

The business’ vulnerability to lawsuits.

Tax implications of the different ownership structures.

Expected profit, or loss, of the business.

Whether or not you need to reinvest earnings into the business.

Your need for access to cash out of the business for yourself.

These are all so very important and need to be considered when starting your business.  I’ll continue later with the different forms of ownership