Starting a new business is an exciting time, full of endless possibilities. However, before launching your startup, it’s important to consider the legal structure of your business. Choosing the right legal entity for your business can have a significant impact on its success. In Maryland, there are several types of legal entities to choose from.
Consider your business goals and needs
The first step in choosing the right legal entity for your startup business is to consider your business goals and needs. Do you plan to operate your business alone or with partners? Will you be seeking investors or financing? Do you want to protect your personal assets from business liabilities?
Sole proprietorship
A sole proprietorship is the simplest and least expensive legal entity to form. It’s an unincorporated business owned and operated by one person. However, the owner is personally liable for all debts and obligations of the business.
Partnership
A partnership is a legal entity that two or more people own and operate. There are two types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners are personally liable for the debts and obligations of the business. In a limited partnership, there are general partners who are personally liable for the debts and obligations of the business, and limited partners who have limited liability.
Limited liability company
A limited liability company is a flexible and popular legal entity for startups. It provides the liability protection of a corporation with the tax advantages of a partnership. The owners of an LLC are called members, and the law protects their personal assets from business liabilities.
Corporation
A corporation is a legal entity that is separate from its owners. It provides the most liability protection for its owners, but it’s also the most complex and expensive legal entity to form. There are two types of corporations: S corporations and C corporations.
A critical decision for your success
Choosing the right legal entity for your startup business is a critical decision that can have a lasting impact on your business. Before making a decision, it’s important to ensure you know all of your options so you can make an informed decision and ensure that your business is set up for success.