Two questions associated with starting up a business are selection of a business entity and selection of an accounting system. Typically, it does not take long to set up a business entity or select an accounting system, so the business owner can complete the work involved in operating the business and postpone the questions of entity selection and accounting systems until just before starting the business.
Normally, a business owner incurs many expenses in setting up a business, so care should be taken to minimize the cost of entity selection and accounting system. This can often be accomplished by shopping around for an attorney or accountant to provide these services. A business owner may also contact the Office of the Minnesota Secretary of State for information about setting up a business entity. Many colleges and universities have departments that can help business owners select a business entity and accounting system, such as the University of Minnesota-Duluth, Small Business Development Center. These services are usually provided at reduced or no cost.
The important thing about setting up a business entity and selecting an accounting system is that this work needs to be done completely and competently before the business gets started. It can be difficult to operate a business and then go back and modify the business entity or accounting system. The business entity and accounting system should be well suited for the type of business, the size of the business (number of owners), and above all, it should be clear to the owner(s) and simple to implement.
Kinds of entities: