If you are thinking about opening a business in 2022 the first thing to do on the list is choosing a business structure. Since everything you do will be affected by your business structure, choose wisely. There are four basic business structures:
Sole proprietorship: A sole proprietorship is essentially what it sounds like. Popular with consultants and freelancers, a sole proprietorship has a single owner and requires little setup. The downside is that there is no legal differentiation between you and your business, making you liable for anything the business owes.
Partnership: If you’re going into business with one or more people, ownership of the business can be shared equally through a partnership. Each partner is responsible for contributing to the business, with the details of their responsibilities included in a partnership agreement.
Limited Liability Company (LLC): An LLC is similar to a sole proprietorship, except you are not responsible for business debt. Another upside to an LLC is that you can be the sole owner or have multiple partners, giving you flexibility when filing business taxes as well.
Corporation: A corporation is the most complex business structure and is considered a separate entity from its owners for tax purposes. While there are benefits such as added legal protection and lower corporate taxes, corporation structure is complicated and can be expensive.