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You’ve made a few freebie websites, donated a site to your church, or maybe you were one of the lucky ones and already have been paid for a site. What now? It’s time to get more serious and think about the organization of a company. What options are out there? Which one is right?

We need to fire up the spotlight, shine our bat symbol in the sky and call for re-enforcements. After all isn’t that all legal mumbo-jumbo or in some foreign language? Believe it or not understanding what business type is right for you, isn’t really that tough. You just need to spend some time to get a good grasp on all the options available. We’re going to cover the main ones which are also the popular ones for the web design and development community. The following should not be considered a substitute for true legal advice, nor will it be a definitive guide. It is meant to give you a base to guide your research and decision.

The Man of Steel (Sole Proprietorship)

Just as Superman was a solo crime fighter most of us start out as a Freelancer. In most cases those who take the time to register a company, based on the laws in their state (if you’re in the US), start by registering a Sole Proprietorship. Wikipedia defines this type of company as:

A sole proprietorship, or simply proprietorship, is a type of business entity which legally has no separate existence from its owner.

In my case when I started out and wanted to form a company, this was my first choice. I had a company name picked out and when I went to register my company name, MY NAME appeared as the company. I had to file DBA (doing business as) paperwork to identify myself as my selected company name. I know it sounds odd, but all you are really doing is telling the government that you are operating as a company and selling products or services.
Advantages:

• All business decisions are yours.
• All profits are yours.
• Taxes are usually easier to file.

Disadvantages:

• Everything is tied to you, including legal issues (like lawsuits).
• You have to do all the work.
• All marketing, promotion, and company growth is up to you.

You can also file a LLC (Limited Liability Company) as an individual. This option will help with the liability of the legal issues, such as lawsuits filed against the company and for some debts of the company. If you are just starting out, this is certainly one company type I recommend investigating for your situation.

The Dynamic Duo (Partnership)

Sometimes going it alone isn’t all it’s cracked up to be. It is nice to have someone ‘covering your six‘ from time to time. This is where partner(s) come in. Again Wikipedia defines a partnership very well:

A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested.

Vantage Street grew quickly out of the Sole Proprietorship I originally set up. I decided that two freelancers working towards the same goal would have a better outcome. Utilizing what I determined was the best company type for us presently, we set up a LLC partnership. Where each of us is still responsible for filing our taxes on our own (like our first type) yet we are provided a limited shield. So what are a few highlights of a Partnership?
Advantages:

• Increased networking ability.
• Shared workload.
• Ability to pool talents.

Disdvantages:

• All authority is divided.
• Partners can legally bind the other without approval.
• Shared profits. (Admit it, when it comes to money we don’t like to share.)

If you can find a partner that is suitable then this may be the option for you. You’ll want to make sure that person is trustworthy, reliable, and has the same vision for your company as you do. If any of those are not present in your chosen person, there is a good chance you’ll have future problems.

The Other Superheroes

There are times it is good to have a Justice League type company, also known as a corporation. An organization with some significant differences to the other two types we’ve covered so far. A corporation is a legal entity which consists of shareholders. Each of these shareholders has limited liability which means that no shareholder can be held liable for debts, acts, or obligations for the corporation beyond their ’shared’ capital.
Advantages:

• Personal asset protection.
• Ownership is transferable.
• Seperate legal entity. (Legally, a corporation is seen as a fictitious person.)

Disadvantages:

• More closely regulated.
• Costly to form and organize.
• Extensive record keeping is required.

Hopefully, you have a better grasp of the most popular business formation types that are available. As web design professionals seeking to create a business it is important that we choose the option that best suits us. If you don’t have the time to research these further to make an educated choice, I recommend seeking professional legal advice. They’ll be able to evaluate your situation, requirements, and business plan and help you select which business type is appropriate.

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Next in this series: Dollars & Sense: Setting the Perfect Rates