In the process of launching a new Maryland business, an owner will be faced with choosing the most appropriate structure for the company. This decision will impact operations, taxation, the owner’s personal liability and other factors. It’s crucial to carefully consider the benefits and potential drawbacks of all options before deciding on the best entity for the specific type of business.
The most appropriate type of entity choice will depend on specific factors, such as the number of owners, long-term goals for the business and how much risk the owner is willing to assume. The most common types of entities include:
- Sole proprietorship — This is a business owned by one person. It is a simple structure, and the owner is responsible for any business-related liabilities.
- Limited liability company — This is a combination of a corporation and a partnership. This option limits the personal liability of the owner.
- Partnership — This business structure involves two or more owners. Each partner contributes to operations, and each partner shares liability for business debts.
- Corporation — This type of business sells shares of the company to stockholders, and there are more initial costs with setting up this type of business.
A Maryland business owner may benefit from professional guidance when making this important decision.
The best entity type for a business is one that makes the most sense long-term. When considering options, it is prudent to consider how an option may affect taxation and the personal financial risks associated with business debts. An assessment of the business plan and long-term goals can help make this decision easier.