Sole Proprietorship: In the long run, this may not be the best alternative, but it is the cheapest and simplest way to begin a business. This simply means that you are doing business in your individual capacity and not through any other business entity. You may operate under your own name or a fictitious business name or DBA (doing business as). In order to operate under a DBA, you must first file a fictitious business statement in the county or township where you plan to do business. The biggest benefit of doing business this way is the simplicity. You are your own boss and do not have to worry about many of the rules and regulations that apply to another type of business venture.

Corporation: When forming a business enterprise, the entity to use is a corporation. The law treats a corporation as a "person" that has its own corporate identity and existence. The corporation serves as a shield between the owners and third parties doing business with the corporation. As long as you observe the corporate formalities, it limits third parties, such as creditors, to going after assets of the corporation and not the owners. A corporation has its own name and separate identity, pays taxes, has the ability to contract, can own property and can sue and be sued. In some cases, a corporation can also be charged and convicted of a crime. The biggest benefit of incorporating is that it provides the owners with protection against possible liability exposure. It can be the best protection against personal liability exposure. Corporation are generally taxed under Subchapter C of the IRS Code ("C Corp"). In certain instances, however, a corporation can elect to be treated under Subchapter S of the IRS Code ("S Corp"). Under this code, for tax purposes, a corporation is generally treated as a partnership. This means that income taxes and expenses of the business pass to the shareholders, helping to minimize concerns over double taxation. There are a number of rules and qualifications that go with forming an S Corporation.

Partnership: A partnership consists of two or more people forming a business arrangement as co-owners. The simplest partnership is a general partnership. Although it is always best to put things in writing, the law does not need a written contract to find there is a legally binding partnership. Many partners have found themselves in the middle of a legal dispute because they entered a partnership blindly, neglecting to define their business relationship. A partnership is, in many ways, like a marriage...very easy to get into one, but when you want out, it is a whole lot harder to get away! Even though a partnership has to be the easiest way to go into business with another person, this probably is the biggest downfall. When entering a partnership, be sure you have a plan. All parties should have a clear understanding of why they have chosen this business relationship over any others. A major benefit to a partnership is that it is not a tax paying entity. A partnership must file its own tax return, but the profits and losses are passed are passed to the partners. The tax and accounting rules that deal with a partnership can be very complicated, however. One of the main concerns in a partnership is that it does not protect against potential liability any more than if it is a sole proprietorship. This means that someone with even as little as 1% interest in the partnership can be held 100% liable for the debts and liabilities of the partnership.

Limited Partnership: From a tax standpoint, partnerships can be a great investment vehicle, but investors are often uncomfortable investing in one because of the liability. This is where the limited partnership comes into good standing. In a limited partnership, investors are only liable for the amount of interest they have in the partnership. So, if a partner has $5,000.00 invested in a limited partnership, his actual liability for the business would be the same. Limited partners, however, in order to maintain this status, must take a very limited role in the business. He is more like a shareholder with no real say as to the everyday dealings of the business.

Limited Liability Company (LLC): When properly organized, an LLC offers the best of a corporation and a partnership. In this, it has the tax benefits of a partnership and the liability of a corporation. It also goes beyond the limited partnership where as the owners or members can be actively involved in the control and management of the business. This is a fairly new business entity and investors still confuse the company with a corporation. On the contrary. An LLC does not have shareholders or officers or directors. It has members and one or more managers that make the day to day decisions. When forming an LLC, you file Articles of Organization and an Operating Agreement governs the affairs of the organization.

Non-Profit Corporation: A non-profit business does not mean it is a business that does not make any money. On the contrary. It is simply a corporation organized and operated for a non-profit purpose under state corporation law and tax statutes and federal tax statutes. A non profit corporation is similar to a profit corporation. It is a separate legal entity, providing those involved with limited liability. To obtain special advantages associated with non profit status, however, they must meet special requirements to obtain these advantages. Non profit corporations are organized under state law and for federal tax purposes is exempt if it is organized and operated exclusively for charitable, religious, scientific, public safety, literary, educational, prevention of cruelty to children and animals and/or to develop national or international sports. If you have a business idea that could operate under non profit status, it is best to consult with you attorney to see if this could be the right way for you to go.