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Start a Successful Business (Inc.) by Colleen DeBaise

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NEXT STEPS:PICKING A LEGAL STRUCTURE

Legally speaking, it’s easy to start a company.

By default—meaning, if you do absolutely nothing—your startup is a sole proprietorship or partnership, unless you and your co-founders (if any) opt for another structure. Such a business is not distinct from its owners, and its income is reported on your personal income tax returns.

And therein lies the key drawback of a sole proprietorship or partnership: You have unlimited liability for your business’s debts. You are personally liable for deals your partners make, even if you have an agreement that limits individual authority. And a mistake can cost you not just the company but everything you own.

So, if you are starting a business, or if you already run one ...

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