Many people dream of owning businesses big and small. Each year, countless entrepreneurs go on to start successful businesses. The first step to securing the dream of business ownership is often to form a company. As a result, any aspiring entrepreneur should understand the ends and outs of business formation.
First, it’s important to understand that you’ll often have several options regarding the type of business to be created. The most common business types include corporations and sole proprietorships.
Selecting the right business structure could play a major role in your success.
Typically, a sole proprietorship is tied directly to the owner. This means that the company and owner are pretty much one and the same. As a result, if a business defaults on a loan or other obligations, the business owner may be on the hook to cover the losses.
An incorporated company, however, is a separate legal entity. This legal entity can take on loans and other obligations. If the business should default, the business itself, not the owner, is on the hook. The business setup process for an incorporated company is a bit complex but many business owners will enjoy the increased protections offered.