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Want to start a Business?
Do you know what type of business structure is right for you? This decision is important to help you know how:
- To organize the business
- To handle the money that flows in and out of the business
- Taxes impact or benefit the business
- If you will be personally liable for the business or not
What types of business structures are there?
01
Sole Proprietorship:
The simplest and most common structure to start a business. It’s an unincorporated business owned by one individual with no distinction between the business and the owner. If your business should be sued, your personal assets could be seized to pay the expenses. There is no tax benefit to this structure.
02
Partnership:
It’s a legal form of business structure between two or more individuals who share management, profit and liabilities. There are several types of partnerships but the two most common are general and limited partnerships.
03
Corporation:
A form of business structure also known as a C-Corp. C-Corp declares the business as a separate, legal entity managed by a group of officers known as the Board of Directors and Shareholders. No limit to Shareholders. This is also a separate tax paying entity which it is subject to double taxation.
04
S-Corp:
An S-Corp is a special tax elected corporation making it a pass-through tax entity, which means that profits aren’t taxed at both the corporate level and again on shareholders’ personal income taxes avoiding double taxation of the C-Corp. S-Corp is limited at 100 Shareholders.
05
Limited Liability Company:
Also know as an LLC, is a business structure that offers the owner(s) the personal liability protection of a corporation with pass through taxation of a sole proprietor or partnership. Advantages of the LLC is you don’t need to be a US citizen to form one and you can elect to be taxed as an S-Corp.
06
Professional Corporation:
For licensed professionals like lawyers, engineers, and physicians, this business structure offers protection against lawsuits and malpractice claims of other owners. Requirements vary by state, but many require that Board members and shareholders be in the same industry.
07
Not-for-Profit:
For an organization that isn’t focused on profit (such as a community art center), a not-for-profit (also called nonprofit) business structure offers many benefits. It may qualify for tax exemption and be eligible for grants. For 501(c)(3) nonprofits, donations are tax-deductible.
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