A legal entity has standing in the eyes of the law and can enter into agreements of all kinds. It can take on a number of forms including individual, association, partnership and corporation. Legal entities form the structure and basis for your company and its operations. They type of entity has significant implications for ownership, decision making and taxes to name a few. In addition to the aforementioned concerns, entrepreneurs need to consider additional factors like:
What type of protections (against claims) as individuals are required?
Don’t be on the hook personally if you don’t have to be. Legal entities are designed with specific purposes in mind. Please match sure your personal needs match those in the type of company you establish.
How transparent should the financials be to the world?
What the world knows about your business largely depends on the type of legal entity you establish. There are limitations and benefits (such as capital raises) for various types of entities. Many come with the cost of transparency. If you don’t like nosy neighbors, factor that into your legal status plan.
Do you have plans to sell the enterprise at a certain point?
Buyers like things tidy and sometimes the type of entity you select can make it easier of harder to sell. The difference between the two is taken out of the proceeds you receive so it’s best plan ahead.
It’s always possible to change your legal entity status. But it deserves your attention up-front because of the extensive effects it can have on your investment. Researching your best options, with the help of experts is a fundamental part of a good planning process.