| The Importance of Incorporation?? |
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| Written by Joe Doyle | |
| Thursday, 03 July 2008 | |
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Page 1 of 2 Those wanting to start a business or entering into a business venture initially have an important decision to make: “Incorporate or not to incorporate, that is the question?” Those creating or running their own business have four basic structures to operate under. The entity can operate as a sole proprietorship, partnership, LLC or a corporation. These structures will be discussed in a bit more detail below.
Sole ProprietorshipThe title speaks for itself. The individual operates alone and is personally liable for all debts and acts arising out of the operation of the business. This structure only makes sense for small, INDIVIDUAL, or temporary business ventures because their may be some tax benefits operating under this structure. Again, this business structure is not an option if there is more than one person running the business organization. PartnershipsIf you are going into a business venture with someone else, by the very nature of the business relationship, you have created a partnership. The two most common types of partnerships are general and limited partnerships. Each one of these partnerships has its own advantages and drawbacks. However, with the general partnership, each partner opens himself up to personal liability to the debts and acts of the partnership. This is probably the major drawback of a general partnership. In contrast, in a limited partnership, the individuals that are limited partners are only liable up to the amount of their investment. Limited partners cannot have any actual or apparent control of the day to day operations of the partnership. The bottom line is that, like a sole proprietorship, the partners generally are liable for the debts and personal acts of the partnership which can be a very unattractive option for some business people. |
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