Why should you spend precious resources on business planning?
Launching a new business venture is one of the most exciting and challenging events of a career. With risks and pitfalls at every turn, the wise entrepreneur invests in up front planning so that their business is built on a solid foundation. Planning on the front end means less headaches and unexpected problems once your business is up and running -- a time when you can least afford the time and expense of putting out fires.

BUSINESS ENTITY DESCRIPTIONS

The following list provides a brief description of the most common types of entities available in most jurisdictions, i.e., Sole Proprietorship , Partnership/Joint Venture , Limited Partnership (LP) , Limited Liability Partnership (LLP) , Limited Liability Company (LLC) , S Corporation , C Corporation (regular corporation) , and Nonprofit Corporation . The descriptions explain some of the pros and cons applicable to these various types of entities. Notably, the list proceeds from the simplest to the more complex forms of entities, and from the least to the greatest protection against personal liability.

• SOLE PROPRIETORSHIP

• PARTNERSHIP / JOINT VENTURE
• LIMITED PARTNERSHIP (LP)
• LIMITED LIABILITY PARTNERSHIP (LLP)
• LIMITED LIABILITY COMPANY (LLC ) – An LLC is an entity formed by one or more individuals under state law. The owners of an LLC are called members (rather than shareholders) and the LLC is treated as a partnership for federal tax purposes.
  
• PROS:
  • The personal liability of an LLC member is limited to their contribution of capital in the LLC, which means that if someone sues the business and wins, they can attach a judgment against the capital contribution of the member(s), but not the personal assets of the member(s) (unless the corporate veil is pierced).
  • There is generally no double taxation applicable to LLCs. For federal tax purposes, single-member LLCs are disregarded as entities separate from their member(s) and multiple-member LLCs are treated as partnerships (pass-through entities) for federal tax purposes unless the LLC has more than two of the four characteristics that define corporations: limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests, in which case it will be treated as a corporation . If the LLC satisfies the requirements to be disregarded or treated as a pass-through entity, the member(s) is taxed at his or her individual tax rate for their share of the profits earned in the business, under his or her individual name and social security number, and there is no business entity level tax. The LLC should file an informational federal return and K-1 forms should be sent to each member representing their share of profits.
  • There are no corporate formalities to conduct or maintain.
  • LLC members can manage the business.
  • LLCs can have one member or multiple members.
    
• CONS:
  • Because of its relatively new form in most states, common law applicable to LLCs is not as established as with partnerships and corporations. Therefore, principles such as “piercing the corporate veil” are less defined and predictable when applied to LLCs.
    
• S CORPORATION
• C CORPORATION (REGULAR CORPORATION)
• NONPROFIT CORPORATION