Business Structures
A business structure is a legal form that defines how a business is organized and operated. There are many different types of business structures, each with its own advantages and disadvantages. The best type of business structure for you will depend on your individual circumstances and goals.
Here are some of the most common types of business structures:
- Sole proprietorship: A sole proprietorship is a business owned and operated by one person. The owner is personally liable for all debts and obligations of the business.
- Partnership: A partnership is a business owned by two or more people. The partners are jointly and severally liable for all debts and obligations of the business.
- Corporation: A corporation is a business that is owned by its shareholders. The shareholders are not personally liable for the debts and obligations of the corporation.
- Limited liability company (LLC): An LLC is a hybrid business structure that combines the features of a partnership and a corporation. The owners of an LLC are not personally liable for the debts and obligations of the LLC, but they are taxed as if they were partners in a partnership.
When choosing a business structure, it is important to consider the following factors:
- Liability protection: How much liability protection do you want?
- Taxation: How will your business be taxed?
- Flexibility: How much flexibility do you need in terms of ownership, management, and financing?
- Cost: How much will it cost to set up and maintain your business structure?
When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
It is a good idea to consult with an attorney or accountant to help you choose the best business structure for your needs.