Starting a new business is an exciting venture for Wisconsin entrepreneurs. From developing products and services to designing a logo, the whole experience can be an exercise in creative strategy. However, many entrepreneurs fail to address an important aspect of their new venture in a timely manner -- their business structure. Understanding which structure will net the most benefits under business law is key to finding entrepreneurial success.
Sole proprietorships are common choices for smaller business, especially since businesses default to this structure if it is not registered as anything else. Entrepreneurs can retain complete control over their businesses with this structure, but there are downsides. Banks tend to be hesitant with lending to sole proprietors, and an owner's personal assets and liabilities are on the line should the business not succeed. This structure is typically best for low-risk businesses or creative entrepreneurs who are testing their business ideas.
Businesses with multiple owners often start out as partnerships, which is the simplest structure in which multiple people can own and operate a business. Most business partners choose to operate as either a limited partnership -- LP -- or a limited liability partnership -- LLP. In an LP, one partner will take on limited liability, protecting that individual from certain business debts, but will only maintain partial control of the business. The other partner will shoulder unlimited liability in exchange for more control. In an LLP, all owners maintain only limited liability while sharing control of the business.
There are several other business structures, including LLCs, C corporations, S corps and more. Still, many Wisconsin entrepreneurs find that their smaller business best benefit from something smaller. Since business law can be an exceedingly complicated topic, most business owners find that seeking experienced guidance can make structuring their startup far easier.
Source: sba.gov, "Choose a business structure", Dec. 31, 2017