They say most businesses won’t survive their first 5 years. However, according to statistics published by the U.S. Small Business Administration, the businesses that incorporate are 40% more likely to be in business past 5 years.
Why is that? Of all the choices you make when starting a business, probably the most important is the type of legal structure you select for your company. Not only will this decision have an impact on how much you pay in taxes, it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.
When making a decision about the type of business to form, there are several criteria you need to evaluate. Just a few are:
- Legal liability.
- Tax implications.
- Cost of formation and ongoing administration.
- Flexibility.
- Future needs.
The bottom line? Don't take the very important decision of selection of a business entity, lightly, and don't make a choice based on what somebody else has done. Carefully consider the unique needs of your business and its owners, and seek expert advice, before settling on a particular business format.