Business owners are faced with a range of important decisions on a daily basis. This includes deciding on the proper formation for your company, which can have a significant impact on its future success. As a trusted resource for clients throughout New England, the attorneys at Zangari Cohn Cuthbertson P.C. offer insight into complex business law matters.

How your enterprise is organized is a basic component of business law, which can seem complex when you’re lacking the right information. To determine which type is best for your unique situation, you should first understand the differences between common business formations.

Business Law 101: 4 Types of Business Organizations

1. Corporations

Corporations are made up of shareholders (owners) and directors (those responsible for managing the corporation). In terms of personal liability, organizing your business as a corporation can protect you against being held financially accountable on an individual level for any debt or losses the business sustains. Typically, corporations are subject to more regulations than other types of business organizations.

2. Partnerships

Partnerships are considered the default business formation. For instance, if two or more associates go into business together and fail to select a formation, they will automatically be classed as a partnership. Partnerships do entail personal liability, which involves the owners being financially accountable for any losses incurred. When forming a partnership, you’ll need to devise a partnership agreement, which governs things like management and obligations.

3. Limited Liability Companies (LLCs)

Limited liability companies combine aspects of both corporations and partnerships. LLCs afford less personal liability but don’t impose the same strict standards associated with corporations. In some states, certain professions (such as doctors) are not able to form LLCs, since limited liability could become a serious issue down the line.

4. Sole Proprietorships

A sole proprietorship closely ties the individual at the helm of a company with the business itself. This entails full liability on behalf of the owner, which can be risky should the business be subject to any lawsuits or other legal actions. As the name implies, sole proprietorships can only have a single owner.

Make sure your business is in good hands by working with the skilled lawyers at Zangari Cohn Cuthbertson P.C. Schedule a consultation with a business law attorney at one of their two New England offices. Clients in Warwick, RI, can call (401) 244-9048, while the New Haven, CT, office can be reached at (203) 789-­0001. Learn more about business formation by visiting this firm online.