If you think about it, business ideas are easy to come by. Converting them into reality and setting up a going concern is where the catch is. If you have a viable business idea and is willing to convert that into a going concern, first decide the business structure you want to adopt. A separate legal entity is necessary to conduct business as to gauge your business success. All business entities are formed under state laws. The legal structures for operating business are Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Partnership (LLP), Corporations and Limited Liability Companies (LLC).
Sole proprietorships and Partnerships are easy to form and operate. Very few statutory formalities and procedures are involved in forming and operating these business structures. The issue with proprietorship or partnership is that the business owner’s personal liability for business obligations is unlimited. This means that if the business defaults payments to creditors or lenders or is unable to meet a business obligation from its own resources, the proprietor or the partner will have to meet them personally. The business failure will affect the business owner’s personal assets.
Legal business forms that limit business owner’s personal liability are LLP, Corporations and LLCs. LLP’s are restricted to certain professions and class of business owners. Corporations and LLC’s are the popular business entities. Corporations involve lot of formalities and procedures to form and operate and are comparatively the most expensive form of business entity. Limited Liability Company formation is relatively simple and inexpensive. Setting up LLC can be accomplished on your own without much trouble. As the rules and regulation to form LLC varies in each state, you may check with the state department handling business registration to understand the procedures involved in limited liability company formation in the state you choose to start LLC.
To form LLC, you have to furnish information regarding the purpose of setting up LLC and its organization. Most states require an Articles of Organization containing all essential information to be filed with the state department handling business registrations. Usually the article is available in a pre-printed format with the department which the LLC incorporator has to fill in, sign and submit. You have to pay a fee for filing the Articles. After the registration of your LLC you have to get all the required business licenses and permits for conducting business in your state. If wish to employ persons in your business you have to comply with the Federal and State employment regulations.
