If it’s a new group of people who are fresh I recommend a limited liability company llc as it reduces the risk of the company would fail as the people and the company are considered separate identities. Furthermore you can still get tax advantages of a business that you don’t get through a normal person. As you get more experience you can change over to a different type of company if you are looking to expand or if people want to leave the group.
I think it depends on the type of company, the field in which the company will work, and the product to be obtained. In such a case, my choice (I'm assuming I'm alone) to begin with would be sole proprietorship. I would then turn to other methods to scale things up, increase diversity and develop further.
@as934 , reading through the other posts, agree this point is not mentioned and is a good one to consider. Tying into this point, the type of corporation chosen also depends on the future intent of the individuals attempting to start this business venture. Many of the other comments mention good factors such as size of individuals trying to start this business, what kind of business, and what kind of work load they're willing to undertake to get it started. However, another very key aspect is what their expectations for the company would be long term.
Some individuals might have the intent to start the venture, make quick money, and move on. Others might be interested in it long term. Still, others may even have the intent to try and pass the business on in some way or to purchase it. Future intent should be a focus point of discussion between any in the party when first starting a business. As mentioned before, there can be alignment in between members with initially different goals as businesses can sometimes change, going from public, to private for example.
The best type of corporation structure for a business depends on what the intentions of the corporation are. Some factors to consider when choosing a business structure are the size of the business, management style, risk level, and growth goals. A sole proprietorship can be good for small, low risk businesses that are just starting out. This platform is easy and inexpensive to set up but comes with unlimited personal liability. A partnership is very similar to a sole proprietorship but is better for companies where there are two or more people sharing profits, responsibility, and liability. A limited liability partnership (LLP) is similar to a partnership but comes with limited liability instead of unlimited. This business structure is good for professional groups who share ownership and want less liability but are harder to get because they are usually limited to certain fields. For smaller businesses that are starting out, these are the three most likely platforms to consider based on risk level and ownership type.
A limited liability company (LLC) is most suitable for small to medium sized businesses looking for liability protection. They also come with the benefit of flexible taxation. Compared to a sole proprietorship or partnership, an LLC comes with much more paperwork and formalities. For businesses that plan on undergoing significant growth, a corporation is the way to go. Large businesses are usually best suited by a C-Corp structure, which gives limited liability to shareholders and is able to issue stocks but undergo double taxation and extensive formalities. Small to medium sized businesses should lean towards an S-Corp structure, which avoids the double taxation but has a limit on the number of shareholders it can hold.
In the end, there are many factors to consider when choosing a business corporation structure. Owners must consider their current size, their plans for growth, risk, shareholders, and management style in order to decide on what the best structure for their business will be.
