Forming a business is an exciting time and requires many important decisions. One of the most important is the type of business entity you choose to operate under. Entity types range from a sole proprietorship where you personally bear responsibility for any and all occurrences to partnerships where you can divide responsibility between individuals to varying degrees. It is also possible to form a corporation, Inc., in which a new legal entity or “being” is formed.

Entity type will also dictate how you are taxed. LLC’s typically have passthrough taxes and will be entered on your personal taxes where Inc.’s face double taxation. It is extremely important to meet with an attorney and your tax professional in order to assist with making these critical decisions.

Did you ever notice that corporate contracts tend to be much longer than the two sentence small business contracts you receive? We hear from way too many small business owners regarding customers not paying for their services. Inevitably, the owner wants to get paid (for good reason) and they want the non-paying customer to pay for their legal fees. Many times we learn that the contract was a handshake which definitely did not outline who would be responsible for paying the parties legal fees should a dispute occur. We understand that paying a couple thousand dollars to have contracts and documentation written seems like a lot. However, when over the life of the business, you may be saving tens of thousands of dollars on future legal fees an nonpayments it becomes a small price to pay for peace of mind.