Creating a business

An important decision you'll need to make is whether you want to go through the legal process of creating a business.

During the process of setting up your business, you can choose one of many different legal structures for your business. Some give you the option to have little to no legal or financial separation between your personal and business finances. Others create a legal organization (generally called an entity) that is, in most cases, legally and financially separate from you, the business owner.

There are a range of legal business structures available to you depending on where you live. Research the various options on your government’s official website.

Benefits of Creating a Business

Benefits of creating a separate business entity can include:

• Access to additional money. Some types of loans, credit lines and financing are generally only available if you have a business entity. For example, investors might offer you money in exchange for partial ownership of your company (also called equity in your company). It can be difficult to offer equity if you haven't created a business entity.
• Build business credit. Your business may be able to build its own business credit history and business credit scores, which it can use to borrow money, open a business line of credit or get a better arrangement with suppliers. Business credit history can help create and maintain separation between the business and the business owner. Access to business credit and funding options could help you run your business and pay for improvements without using your personal money or credit. Be sure you understand the business credit system in your region. 
• Receive potential tax savings. Depending on your location, business owners might be able to choose between several options for how and when they get paid as the owner of the business and as an employee of the business. Some options might decrease how much you personally pay in taxes. Be sure to review the tax code for your jurisdiction. 
• Sell the business in the future. If you think you might want to sell your business in the future, it could be easier to transfer ownership if you create a separate business entity.
• Limit your risk. Depending on your location, creating a separate business entity may protect your personal finances from liability if, for example, someone slips and falls in your store. However, liability and legal business structures vary from country to country. Be sure to conduct thorough research on your own jurisdiction.  
• Appear professional. Creating a business entity could help you appear more professional during your work with suppliers, investors, financial institutions and customers.

In addition to deciding if you want to create a business entity, you will have to pick which type of legal structure you want to use for your business.