While there are many decisions to make when starting a business, once you decide to start one, you need to think about which legal entity is the right fit. In Michigan, there are a variety of business entities that you can choose from when setting up your business. It is essential to do your homework to pick the correct entity to avoid unnecessary liability and tax ramifications in the future.
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We always encourage people work with both their accountants and their lawyers when forming a new business to make the best choice for their situation.
Picking the wrong entity can have serious consequences in regards to liability, costs, and ability to operate in the way the entity wishes.
When looking at starting a business, there are a few different entity options to consider, including:
- Limited Liability Companies
- Partnerships and Limited Partnerships
- Limited Liability Partnerships
- Professional Service Entities
There are many aspects to evaluate when deciding which entity to choose, as all entities have different appeals and potential pitfalls. These should be carefully reviewed with your attorney and your accountant.
We also help our clients decide which state to form their entity in, as some clients wish to form their entity in Delaware or Nevada due to their corporate laws.
When looking at which entity will work best for your business, some things that you should think about include:
- Whether there is one owner or multiple owners,
- Whether the owners are individuals or entities,
- How much involvement the owners will have in the business,
- Type of contributions that will be made to start the business,
- Management of the entity,
- Potential liability of the entity,
- Tax considerations, and
- Sale of the company.
As every business is different, the list above is far from exhaustive. We work with our clients to make sure that their formation documents are tailored to them closely.
We help our clients walk through different possibilities and scenarios to make sure that when they form their entity, they are getting the most protection possible under the law, while still being able to carry out their business endeavors.
If you have questions about starting your business, contact Rickard & Associates today.
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