Small Business Startup Tips - Corporate Structures

To begin putting your business name on any promotional material and on your signage, register the name of your business at the Montana Secretary of State Office website (http://sos.mt.gov/Business/Forms/). You will need to know the corporate structure for your business at this time. So what are your options?

  1. Sole Proprietorship – owned by a single individual, the sole proprietor has total control and is responsible for all taxes and liabilities of the business.

  2. General Partnership – two or more people act as co-owners, and both share the losses, profits (taxed as personal income for each individual), and personal liability for claims against the business.

  3. Limited Liability Partnership – similar to the general partnership, except that none of the partners can be held personally liable for claims against the business; they are not responsible for the negligence of their employees or the other partner unless they were involved in the action that led to a claim against the business.

  4. Limited Liability Company – you have the personal liability protection of a corporation but the favorable tax treatment of a partnership, as well as flexibility in the contribution and distribution of assets.

  5. Corporation – the most complex legal structure, a corporation exists apart from its owners or shareholders, and is owned by those who invest money in it. These shareholders have annual meetings to elect a board of directors, who in turn make policy decisions and selects corporate officers to manage the business.

Since each legal structure has distinct advantages and disadvantages, it is a good idea to consult an attorney, an accountant, or a business and/or financial advisor to determine the right fit for your business.