Willie and Billie plan to start a business offering 1950s nostalgia items: instant sock hops for your party, gold lamé suits for him and her-the works. They've got some investors and capital, and have done a marketing plan, but before they start up they need to dot the legal Is and cross the legal Ts. They've at least considered various legal forms for their business, but they're confused and uncertain, and what they really want is someone to tell them what they should do.

Sorry, Willie and Billie, there is no answer that will work for all businesses-otherwise we'd have only one form of business organization. Yes, one choice-the sole proprietorship-will work for many start-up businesses. If there's just you, and you're willing to risk some personal liability, or have insurance to cover at least some of your liability risks, then this isn't a bad option.

But not all businesses have just one person-there may be two or three or more principals. For a variety of reasons, you may want to give other people a piece of the action. And not all are on a shoestring-some have investors or other sources of capital. Some want to operate in more than one state. Some "new" businesses may be building on the foundation of existing businesses.

Hiring an experienced business lawyer would help Willie and Billie make this critical decision. The lawyer could take some of the burden off of them by examining their particular situation, suggesting a business form and then helping them take the steps to meet all the legal requirements. Accountants or other professionals who know about their business can also get involved in these and other important issues that must be dealt with in setting up and operating a new business.

But in the final analysis, the business owner must make the decision, and often there are no clear answers, even if you do have professional help. You just can't meld all the relevant tax and non-tax factors into a neat set of guidelines. You have to look at your situation carefully-what might be the best choice in one case might not be the best choice in a similar but slightly different set of circumstances.

1. What type of business organization is appropriate for my business?
2. Why is protection from personal liability so important?

Subsections

1. Sole Proprietorships
2. Partnerships
3. Corporations
4. Limited Liability Companies