When a client wants to start a new business
or purchase an existing one, one of the initial considerations is whether or not to incorporate or what unincorporated business entity
will best benefit his or her business’ needs. Choosing a business organization
as an unincorporated business (for example, as a sole proprietorship, general partnership
, limited liability partnership
, or limited liability company
, etc.) or as a corporation
depends on tax and non-tax factors. For instance, certain businesses cannot be incorporated, while other businesses, like medical practices, banking and insurance institutions, must be incorporated. However, clients involved in a wide range of business activities, have the choice of the form of business organization.
Business organization considerations involve how the business entity is taxed, the amount of individual liability, and the amount of control an individual has over the business. For instance, in a sole proprietorship, the business is the individual. In this sense, the individual has full authority and control over the business but also assumes unlimited liability for all debts incurred by the business, and the business is taxed as an individual.