Unlock Success With
The Right Business Entity

What Is a Business Entity?

A business entity is a legal structure created to conduct business activities. It can take different forms, such as a limited liability company (LLC), sole proprietorship, partnership, corporation, non-profit, and franchise. Business entities are separate from their owners and have their own legal rights and obligations.

These legal entities are used to organize and manage businesses, and they provide various benefits, such as protecting personal assets, limiting liability, and facilitating tax planning.

Why Choosing the Right One Matters

Before opening a business, it’s important to select a suitable entity. The top reasons for choosing the right business structure include:

Liability Protection

Different business entities offer varying degrees of liability protection for the owners. For instance, a corporation provides the strongest liability protection, whereas sole proprietorships offer the least. If the business has been sued or faced financial struggles, the right business entity can shield the owners’ personal assets from being seized to pay off debts.

Tax Implications

Each business entity has different tax implications. A sole proprietorship is elected to be taxed as an individual, while a corporation is taxed separately. You can minimize tax liabilities and maximize tax benefits with the right business entity.

Ownership Structure

Some business entities, such as partnerships and corporations, allow for multiple owners, while others, such as sole proprietorships, do not. Having the right one can help to ensure that the ownership structure aligns with the business’s goals and objectives.

Fundraising

Certain business entities, such as corporations, can issue and sell stocks to investors to raise capital. Other entities, such as sole proprietorships, may have limited options for raising funds. The proper business entity can help to facilitate fundraising efforts.

Growth and Expansion

As a business grows and expands, changing its legal structure may be necessary to accommodate its evolving needs. Choosing the right business entity from the outset can help ensure the business is well-positioned for future growth and expansion.

The Formation Documents Needed For Your Business

Depending on your chosen business entity, you’ll need the following documents to establish it.

• Articles of incorporation or organization - Corporations need articles of incorporation, while articles of organization are required for LLC formation.
• Corporate bylaws for corporations
• An operating agreement for LLCs
• Annual reports for corporations and LLCs
• An assumed name, fictitious name, or “doing business as” (DBA) name certificate for sole proprietorships
• A partnership agreement outlining the terms of a business relationship for partnerships
• An Employer Identification Number if your business manages employees

State laws may also require you to obtain a general business license. Nevada issues this license to all business entities operating in the state.

Let’s Find the Right Entity for You

NCH is here to help you understand what business entities are and how to create the right one for your unique needs. With our extensive experience and expertise, we can provide guidance that will put you in the best position to succeed.

Regardless of what entity you choose, NCH will guide you every step of the way. Get started by calling one of our business formation specialists at 1-800-508-1729.