Business entities come in several varieties, each with their own characteristics. In certain circumstances these differing characteristics can be beneficial, while in others they can cause quite a few unexpected problems. It is important to remember that all of the different types of corporate entities have certain rules that govern their operation. The laws of the state in which the entity is formed will provide a default set of rules under which the business will operate. Some of these rules can be changed, while others cannot. Some entities are more flexible, allowing the founders and owners to greatly alter these “default rules.” Knowing what rules govern our business entity and deciding what to change and how to change it can help maximize the benefit you receive from having a business entity.
It is also important to remember that different types of business entities might be better for different stages of your business. Fortunately, converting a business from one type of entity to another usually isn’t too difficult (although you should always check with your accountant or tax specialist, because taxes can be tricky depending on your situation!) First, we will look at the simplest form of corporate entity, [the sole proprietorship.] (link to sole proprietorship) Then we’ll have a look at a few varieties of partnerships before getting into the more familiar types of entities: limited liability companies and corporations.
© 2016 John V. Robinson, P.C.