When starting a new business, there are many potential problems for the innocent small business owner. One of the key aspects to starting a business is the business plan. The first question you must ask yourself is do you have a good business plan? One of the first sections of any good business plan is determining what form of business organization to choose.

Under Massachusetts law, there are several types of business entities to choose from when forming your new business endeavor. These entities consist of sole proprietorships, partnerships, limited liability companies and corporations.

These business forms have many advantages and disadvantages over each other and choosing the right business formation is critical. Some of the issues to consider are, how the business and owners will be taxed? Who is liable for the actions of the business? How easy is it to transfer ownership rights in the business? Does the business have a centralized management?

A sole proprietorship consists of single person who owns all the assets of the company and is solely responsible and liable for any dealings of the company. This type of business will end at the wish or death of the sole owner.

A partnership is an alliance of two or more people who operate a business as co-owners for a profit. A partnership can be created without any formal papers signed or filed. All partners are responsible and liable for the actions of the other partners.

A corporation is formed by one or more individuals who implement and file the business's articles of incorporation with the Massachusetts Secretary of State's office. A corporation is considered a separate entity or an unnatural person. It is independent from share holders of the corporation. This means, a corporation is its own person. There are many tax and liability benefits to forming a corporation.

Some of the benefits of a corporation are:

• The owners wish to limit their liability;
• The owners prefer easy transfer of their ownership interests in the company;
• Access to capital markets is important to gain potential investors;
• Centralized management is important;
• The continuation of the corporation is uninterrupted by the death or withdrawal of an owner.

Limited liability companies are unincorporated organizations having one or more members formed by compliance with Massachusetts laws. In most cases, the business owners are not personally liable for the debts, obligations or liabilities of the LLC. If formed properly LLCs will be treated as partnerships for federal and state tax purposes.

The choices are many and making the right choice as well as filing the correct forms with the state is a critical component to starting and flourishing as a new small business. The law office of Goldstein and Clegg can assist you with making the right choice. Moreover, we can draft and file the forms with the state and town you intend to business in. We can also assist with the development of your initial sales, purchase, and employment contracts. For more information please contact us today.