One of the most important decisions that a business owner can make is how to structure the company. There are different options for business entities, and you should carefully consider each one to determine its possible benefits and drawbacks for your specific business. It is wise to discuss this matter with an experienced Fargo business attorney who can provide advice and counsel to help set your company up for success.
Some choices for business entities in North Dakota include:
- Sole proprietorship
- Partnership
- Limited liability company (LLC)
- Corporation, including S corporations or C corporations
There are other more specialized entities that apply to certain enterprises, as well, though the above are the most common entities.
When choosing your business entity, there are three main factors to consider, which are as follows:
- Liability – How much liability are owners willing to accept for the debts and obligations of the business?
- Taxation – Do you want your taxes to be simplified? Are there ways that you can use certain entities to lower your taxes?
- Formation and ongoing paperwork – Some entities have much stricter requirements for formation, as well as record-keeping and regular filings with the state. Some entities have no requirements at all.
It is important to compare all of your options and weigh all of the factors, which can be a complicated undertaking. For example, with a sole proprietorship, you can start operations right away without any formation or documentation requirements. However, you will have no liability protections nor flexible tax options.
On the other hand, forming an LLC or corporation can provide significant protection from personal liability, as well as different tax options depending on your situation. However, both an LLC and a corporation will need to be formally registered with the State of North Dakota. Once your entity is formed, you will need to file ongoing records with the state to maintain your business.
There are other factors that can impact your decision of a business structure. How are you funding your business? How many owners do you have? Do you expect your operation to grow substantially or stay relatively small? Do you want to sell stock? These are all important questions that need to be answered before you start structuring your business.
If you already started operating as a sole proprietor, it does not mean you cannot change your entity type later on. If you believe that your current business structure is not ideal, you should discuss possible changes with a trusted lawyer.
Consult with an Experienced Fargo Business Lawyer for Assistance
At the law firm of O’Keeffe O’Brien Lyson Attorneys, we assist owners of all types of business enterprises with many legal questions and concerns, including deciding on and forming the right business entity. Contact our experienced Fargo business attorney Stephen Welle directly by email, or call our firm at 701-235-8000 or toll-free 877-235-8002 to set up an appointment.
