Forms of Business Organization
The specific types of equity financing available to you are, to some extent,
determined by the organizational form of your small business. While your choice
of business form or "entity" for your small business involves a wide
spectrum of other important issues — such as the degree of personal risk
involved in the type of business, tax considerations, and the need to attract
good business managers — the following discussion highlights some of the
financing considerations associated with different forms of business entities.
proprietorships are the simplest businesses to form, but equity
financing is limited to the owner's assets.
partnerships require at least two owners, so equity financing
possibilities are greater than in proprietorships.
partnerships can provide limited liability to some of the owners, if
they're not active participants in the business.
provide the most flexible possibilities for investors.
liability companies/limited liability partnerships are relatively new
forms of entity that combine favorable tax treatment with limited legal
liability for the owners.
form is best for you? No formula exists for making the determination of
which entity is best for your business.
combinations are a way of leveraging your business's assets through
contractual arrangements with other companies.