What Is the Best Formation for Your Small Business?

If you’re considering starting a business in Georgia, you’ve chosen a great state to conduct business in. Advantageous taxation rates and job creation incentives are just two of the reasons why Georgia is widely considered one of the best states for small business owners.

There are many things to consider that will have a major impact on your new business. Choosing a business entity designation is one of the most important elements of establishing any business. Different entity designations have particular requirements and advantages. Here are some business formation questions and answers that can help you decide which incorporation type is right for you.

What business organization choices do I have?

Choices for your business formation include sole proprietorship, limited liability company, corporation and two different types of partnerships. As you explore your options, it’s important to keep in mind that a business organization type that works for one small business may not work for another.

I’m starting a small business out of my home. Do I need to register my business?

If you are starting a business and plan to work alone, for example as a contractor, you may consider organizing as a sole proprietorship. In the state of Georgia, a sole proprietor doesn’t need to be registered with the state, making this a quick way to set up a business. Remember, while a sole proprietor owns all of the assets and profits of the business, he or she personally holds all of the liability as well.

Can I form a limited liability company (LLC) if I am a one-person business?

Yes, you may form an LLC as a one-person business, such as a consulting or contracting service. While you will need to register with the state, your liability is limited to the monetary and material investment that you have committed to the company.

Forming a corporation sounds complicated. What are the pros and cons?

If you organize your enterprise as a corporation, you will be able to raise money through selling shares of the business to investing individuals or entities who become shareholders. Forming a corporation is complex, necessitating assistance by knowledgeable legal counsel. There are required records to keep, but the limited liability and the opportunity to raise major capital may make starting a corporation worth it.

Limited partnership and general partnership sound so similar. What are the differences?

The main difference between a limited partnership and a general partnership is the way liability is handled. In a limited partnership, the liability of each partner only goes as far as the investment value into the partnership. In a general partnership, each general partner is fully liable for the debts of their business. Again, it’s often a good idea to consult with a legal professional who is experienced with business formation.

Embarking on a new business venture is exciting, yet nerve-wracking at the same time. A business organization type that works for one small business may not work for another. That’s why it is important to consider all of your options. Also, a new business will need to set up any applicable tax, registration and trademark requirements. With the excellent business climate in Georgia, you have the latitude to make your business successful.

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