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Which Business Formation Method is Best?

Company formation is the legal method of incorporation of an enterprise. It can also be called a business registration. Generally, these terms are also used when formally incorporating an enterprise.

LLC or a Partnership:

In general, business formation in RAKICC is only applicable if you are forming a limited liability company or a partnership. However, it is possible to incorporate a limited liability company and incorporate the partners as separate entities. The choice depends on the nature of the business and the status of the partners. For instance, in a partnership each partner has an equal right to share in the business.

LLC and Incorporate:

There are many reasons why some people prefer to form a limited liability company and incorporate as individuals. The most common reason is to avoid double taxation. In the case of an LLC, the business and personal assets of the partners are treated as separate entities. This allows the business to effectively minimize its tax burden, especially when filing as an individual. Filing as an individual also protects the business owners’ economic assets from the payouts to the partners in the event of the business going bankrupt.


Another reason for filing as an individual is to protect the business owner’s inheritance and estates from the eventual profits and losses in the company. It is often difficult, though not impossible, for family members to determine the future profitability of a corporation. Also, a partnership will only be able to distribute its accumulated assets among the partners if that person dies or is incapacitated. When filing as an individual, a power of attorney allows one person to act on behalf of the business. This gives that person authority to make financial decisions for the business, which may include deciding how to route assets to minimize liability.

Solar Proprietorship:

One last option available to those considering business formation but do not wish to file as an individual is to choose an entity type. A sole proprietorship is the most common choice, because it allows limited liability. Other entity types options you can find at Shams free zone includes:

  1. corporations
  2. partnerships
  3. LLCs
  4. corporations combined with a partnership

Business formation requires that all documents be filed with the local office. Once the paperwork has been filed with the county, the new company must designate a company officer. The officers will all have to sign the document known as a power of attorney, which will allow the company to transact business under its own name.