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A Brief Overview of Business Entity Formation When just starting out, many small businesses are more like part time occupations. In the beginning at least, a small business venture will not generate much profit. After some time, many small businesses begin to generate real profits, making them viable business opportunities for those who own them. At some point, however, a small business owner has to start thinking about protecting the investment they have made in their business. The best way to protect business assets is to form a business entity. If you are a sole business proprietor, you may be subject to a nearly unlimited business liability. Of course the term ‘unlimited liability’ needs some clarification. The term unlimited liability means that a business owner can lose much more than their business assets if their business fails. Depending on your state, a sole proprietor can even lose their personal possessions if their business fails, including their home and other valuable property. This is the main reason why business entity formation is such an important thing for business owner to learn about. Once you have come to the decision to form a business entity, you will then need to figure out what kind of business entity that you would like to form. A number of different business entities are available, each of which will protect a proprietors assets in a number of different business situations. Included among these business entities are corporations, limited partnerships (LPs), limited liability partnerships (LLPs) or limited liability companies (LLCs). Through business entity formation, a sole proprietor may reap a number of important advantages.
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The most common type of business entity formed by small start ups these days are limited liability companies or LLCs. Limited liability companies are the most popular option among startups because they are well suited to small businesses, but offer the same kind of protections that you would get from a corporation. When you get an LLC, you have to first apply for it with your state comptroller. After being granted with your LLC, you will be given a tax ID number from your state comptroller.
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If you are the sole proprietor in a small business venture and want to protect your business and personal assets, it is a good idea to contact a business attorney about applying to form a business entity. Discussing your situation with a business lawyer is sure to help you figure out the best way to protect all of your business and personal assets. The laws governing business liability are different from one state to another, making it important to ensure that you get in touch with a business law attorney in your state to ensure that the advice you get about forming a business entity is as accurate as possible. To get started, all you have to do is search the Internet for more information about business entity formation by visiting the website of a local business attorney in your area.