However, the success of any business starts with having clear goals and strategies. One of the most critical aspects of setting up your business is choosing its formation. Also known as the business structure, a business formation helps determine how your business will function while also offering liability protections.

Types of business formations

Each kind of business structure has its advantages and disadvantages. Understanding every type can help you figure out which structure will benefit your business the most. Here are the most common types of formations:

1. Sole proprietorships: As it sounds, a sole proprietorship means that you are the only owner of your business. This type of formation is the simplest as it doesn’t involve any fees or paperwork to set up. With sole proprietorship, only you are responsible for your company’s profits, debts and management.
2. Business partnerships: It’s common for businesses to have two or more owners. Splitting the responsibilities can help your business run more smoothly, and each owner will be liable for debts or claims. Business partnerships can face challenges when the partners don’t see eye-to-eye, which is why you should create a partnership agreement before you begin working together.
3. Corporation: Unlike the previous two options, a corporation is its own legal entity. This means that it is created solely to conduct your business, separate from any of the owners. In this form, the corporation will have to pay taxes and can face liability claims of its own.
4. Limited liability company (LLC): Think of an LLC as a hybrid of a partnership and a corporation. Owners can benefit from receiving profits without taxation of the company, such as in the partnership model, while the corporation model protects them from any personal liabilities.

Choosing what’s best for you

Before you settle on a business model, you should research every type of formation that is available. Make sure to consider all the factors, such as the costs, risks, ease of set up and termination, expansion and taxes.

If you’re still struggling to decide what’s best for your business, consult with an experienced attorney. They can help you through understanding each business structure so you can make an informed decision.

Taking responsibility for the mistakes you made is important. But the customer must pay you regardless, though many may try to avoid doing so. If you find yourself in this situation, keeping these tips in mind can help you collect the debt owed to you.

Take preventative measures

Drafting an agreement upfront can save you from nonpayment. When your client signs this contract, they then agree to pay you a certain amount for your services. They will pay you this amount regardless of the outcome. You could also collect part of their payment upfront. Doing so may help lessen the sting of potential nonpayment thereafter.

Work with the client

Working with your dissatisfied client could prove a creative way of receiving your payment. Before you adopt a defensive stance, ask them – and yourself – some questions about why they’re withholding it. Were they dissatisfied with your design? Or did you make a fixable mistake? By adopting a conciliatory tone, you can improve the odds that your client will decide to pay you.

Go through the courts

Your client may still refuse to pay you, no matter your agreement or efforts to make things right. If they keep resisting, you will want to pursue a small claims settlement or a civil suit against them. Under Kentucky law, if the amount the client owes you is $2,500 or less, your case will go to small claims court. If they owe you a sum greater than $2,500 – or make false allegations of mistakes to avoid payment – then you will file a civil suit.

When you perform a construction service for a client, they must pay you. This agreement remains true whether you completed the job as expected or made a mistake. Working with a lawyer who has construction litigation experience can help you achieve the recourse you deserve.