New businesses start all the time. While not all that open their doors make it through their first years of operation, those that do refine their procedures and practices to become more efficient and successful. Often, the formation plan that a Michigan business adopts can influence is future and capacity to grow.
Different businesses choose to use different business formation plans, and this post will discuss several types that entrepreneurs can consider before starting their new entities. The contents of this post should not be read as legal advice, and all entrepreneurs that plan to start new businesses should consider discussing their formation plans with knowledgeable Michigan business law attorneys.
Business formation structures and liability
The start of a new business can be an exciting time but also a stressful time for its owner. That is because businesses take on financial and legal responsibilities as they put products and services out into the world of commerce. When problems arise, businesses can find themselves facing creditors, lawsuits, and other serious challenges.
Depending on the type of business structure that an owner adopts, they may or may not be personally tied to the liabilities of their entity. For example, owners of sole proprietorships may incur the liabilities of their businesses, but corporation owners can generally shield their personal assets from financial and legal attacks on their businesses.
Business formation structures and taxes
Not all businesses exist as their own separate financial entities. While partnerships, like sole proprietorships, are tied to their owners, corporations stand as their own taxable organizations. A corporation must provide tax returns for its financial dealings, and those financial transactions exist separate from the personal tax liabilities of its owners.
Taxes and liability are two important considerations that entrepreneurs should evaluate before choosing a business formation plan. However, there are many others that should be factored into the decision as well. Business law attorneys can help their clients make responsible decisions on how best to structure their new entities.