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Choosing a Legal Structure, pt.1:
The Sole Proprietorship and the Partnership

Once you have decided to start a business, you must decide what type of business entity to use. There are many legal and tax considerations that will enter into a sound decision. These legal considerations can become very involved and you should consult an attorney to help you determine the appropriate structure.

There are four principal forms of business structure in Alabama:

The decision should be based on your specific circumstances, goals, and needs. These structures, along with their advantages and disadvantages, are listed below:

The Sole Proprietorship

The sole proprietorship is a business that is owned and operated by one person. To establish a sole proprietorship, you need only obtain whatever licenses are required and begin operation.

Advantages

Disadvantages

The Partnership

The Uniform Partnership Act, adopted by many states, defines a partnership as "an association of two or more persons to carry on as co-owners of a business for profit." Though not specifically required by the Act, written Articles of Partnership are customarily executed. These articles outline the contribution by the partners into the business (whether financial, material, or managerial) and generally delineate the roles of the partners in the business relationship.

Some of the characteristics that distinguish a partnership from other forms of business organizations are

Advantages

Disadvantages

Next section: Choosing a Legal Structure, pt.2: The Corporation



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