Learning how to start your own business is the first step towards private freedom and economic security. But to be able to make the process as easy and trouble free as possible, you want to make certain you are going about it in the best way possible.

One of many first things you'll have to think about when deciding how to start your own business is what kind of business entity is best for you. There are a lot of things to consider: the character of your particular business endeavor, whether or not you have to shield your private assets, whether you'll be seeking a loan, etc. There are a number of options out there, each with its own benefits and disadvantages.

Sole Proprietor

Being a sole proprietor is the simplest business entity option available when deciding how to start your own business. Primarily, it means that you and your business are the same - you ARE your business. You have no partners (thus the name "sole"), and the businesses cease to exist when your involvement ends, whether or not by choice or your death.

The benefits of a sole proprietor business is its simplicity. You generally need only to begin doing business. In some localities you will have to file your business with the city or county, and, depending on the kind of business and your local legal stipulations, chances are you'll need a permit. However aside from that, you're usually good to go. You don't even need a separate checking account, since you and your company are the same (though it in all probability is sensible to open one, so as to easily differentiate your enterprise and private finances).

Of course, a sole proprietorship comes with some disadvantages, too. Before everything, because you and your business are the same, so are your assets. Subsequently, should anyone take legal action against your organization, your private property will be in danger, as well as your business assets. For this reason alone, when you have comparatively substantial personal assets, another business entity probably makes more sense for you when deciding how you can start your own business.

Corporation

In all probability the most well-known business entity is the corporation; it's what you in all probability consider first when you decide to start your own business. Unlike a sole proprietorship, a corporation is separate and distinct from its owner(s). Consider it as a distinct "person," if you will. It has its personal assets and liabilities, can survive the involvement of its owners, has its own name, checking account, etc.

The biggest advantage of choosing to start your own business as a corporation is to protect you and your assets from liability. Because the corporation is a separate entity it's liable for its own activities and monetary obligations - AS LONG AS the owners (shareholders) observe the rules of the state wherein they're incorporated and keep their private and corporate actions, assets, etc. separate from one another. If the shareholders do something on behalf of the corporation that's considered unlawful or irresponsible, they can be held personally responsible.

Different advantages include some tax benefits (talk to an accountant to understand more), plus the enhanced business image of being a "corporation." Prospects, traders, banks, etc. are often more inclined to do business with a corporation than a sole proprietor.

Along with the benefits of establishing yourself as a corporation come some added complications. Again, you need to abide by the corporate rules and guidelines of your state of incorporation. There may be further charges or taxes involved, maintain records of annual shareholder meetings, and in some instances, potentially high tax liability. Corporations are additionally more complicated and expensive to set up. While you are able to do it yourself, it is sensible to enlist the help from a lawyer or accountant.

Detailing all the pros and cons of a corporation is a giant topic, and might range from state to state, as well as the type of corporation you form (S- or C-Corp). So consult a local legal professional to completely understand the benefits and disadvantages.

Limited Liability Company (LLC)

Thought of by some to be the perfect of both worlds when deciding the best way to start your own business, the LLC is a comparatively new business entity. LLCs offer you safety from private legal responsibility in business matters, however are simpler to establish and maintain than a corporation.

Like a corporation, there are certain rules and guidelines one must comply with in an LLC - but again, generally fewer than in a corporation. The other main advantage is tax-related. Earnings in an LLC can move through to the owners. In other words, the LLC does not pay tax itself; rather, the owners pay personal income tax on their share of company profits.

By way of disadvantages, there are few (when compared to a corporation). Whereas an LLC is definitely more difficult to arrange and preserve than a sole proprietorship, it's typically much less so than a corporation, while providing many of the similar advantages.

This article ought to only function as an introduction to which business entity to choose when deciding how to start your own business. This is a crucial decision. Whereas it's possible to alter your business type down the road, it is always simpler (and cheaper) to decide on the best option right from the start.

What kind of business is the right one for you? Please check out my website for more information before you consult with your attorney to turn your dream of having your own business into a successful reality!