You have a business idea. You believe in its potential to make a profit and eventually grow. Having your own business may seem exciting at first. You have your own time, and you keep all the money. What you may have yet to realize is successful businesses start somewhere. It is a process. It involves determination and grit. It also comes with financial and legal implications that depend heavily on your chosen business structure.
What business structure is for you?
Your business entity is the foundation of your company. It will help you determine how exactly to start your business. In Oregon, you can choose from these five common business organization structures. The most popular one for budding entrepreneurs and small business owners is sole proprietorship.
A single individual has one sole owner. The owner reports business profits on their personal tax return. It is the simplest of all business structures and requires no formal paperwork. Sole proprietorships are so straightforward because you and your business are one entity in the eyes of the law. You may have a business plan established to help you set goals, but it is unnecessary. You do not even need to register with the state. Yes, you make all the decisions and have total control of your company. However, you do not have any liability protection.
What is liability protection?
Liability protection protects you and your personal assets from business problems and issues. If a disgruntled client is unsatisfied with your product or service and decides to sue your company, your personal assets and property are not safe from seizure. You are also personally liable for the debts your business incurs.
While it is easy to start a sole proprietorship, you may want to consider changing to a more formal business structure. The paperwork will be more challenging, but the legal protection may come in handy when future business disputes arise.