Banks and other financing sources are often reluctant to make business loans to sole proprietorships. If your business will be owned and operated by several individuals, look at structuring your business as a partnership. In a general partnership, the partners manage the company and assume responsibility for the partnership's debts and other obligations. A limited partnership has both general and limited partners. At tax time, each partner files a Schedule K-1 form, which indicates his or her share of partnership income, deductions and tax credits.
Personal liability is a major concern.
Like sole proprietors, general partners are personally liable for the partnership's obligations and debts. Partnerships are also more expensive to establish than sole proprietorships because they require more legal and accounting services. Corporation A corporation is an independent legal entity, separate from its owners, and as such, it requires compliance with more regulations and tax requirements. A corporation's debt isn't considered that of its owners, so you're not putting your personal assets at risk. A corporation can also retain some of its profits without the owner paying taxes on them.