Coming up with the idea for a new business is easy. However, before you launch or advertise your company, you must decide how you want to structure the business. The structure of your business determines how you register with state and local government. Most businesses are required to register before conducting legal transactions.
LLC
Limited liability companies are state-governed entities. A hybrid between a sole proprietorship and a corporation, an LLC allows you to maintain a flexible management style while enjoying legal protection. You must file articles of organization with your state government in order to form your LLC. Articles of organization, are usually filed by the secretary of state, who mails you a confirmation of your business registration. Some states also require an operating agreement along with your articles of organization. An LLC operating agreement outlines how members will run the business and make important decisions.
Sole Proprietorship
If you are a sole proprietor, you are considered to be one and the same as your business entity. In the event of a lawsuit, you are personally responsible. Sole proprietors can operate their businesses in their personal names without registering with state or local government. However, if you choose to operate under a different name, you must register your business as a DBA, Doing Business As, or fictitious name.
Partnerships
A partnership consists of one or more individuals engaged in activities to make a profit. Legally, a partnership is similar to a group of sole proprietors. Each business owner has personal liability in the company. To register this business type, you can register a fictitious name for the partnership or use a DBA. Each partner must be present to execute filing forms in order to legitimize your business registration. A new DBA registration must be filed each year.
Corporation
A corporation requires the most administrative responsibility. You must establish articles of incorporation along with corporate bylaws and a board of directors prior to registering your business. Formation documents are filed with your state's corporations commissioner or secretary of state. Incorporating is also the most expensive option when registering your business. DBA registration fees range from $10 to $100 while LLCs are generally $75 to $125. Corporation filing fees range between $200 and $1,000.
