When forming a new company, one of the first critical decisions is the formal structure that business will take. Issues such as liability, ownership, operating strategy, and taxation are all impacted by the formal structure of the business. Four different business structures are discussed below: partnership, corporation, Subchapter S, and limited liability corporation (LLC).

Partnerships

A partnership is a business association where two or more individuals (or partners) share equally in profits and losses. As is the case with a sole proprietorship, partners have full legal responsibility for the business (including debts against the business). Persons entering into this type of business need a partnership agreement detailing how much each partner owns of the business, how much capital each person will contribute, and the percentage of profits to which they are entitled; how company decisions will be made; if the company is open to new/additional...