Have you always dreamed of starting a small business from scratch?
Becoming an entrepreneur isn’t easy, and yet the United States is built on the backs of risk-takers just like you. The key is to understand the basics of business structure so you can give yourself the best chances of success. Fortunately, this article can help you get started.
Here we take a look at the most common business structure types that you should keep in mind as you put the pieces in place to get your operation off the ground. Keep reading to learn more about the ins and outs of a legal business structure to take your company to the next level.
General Partnership (GP)
This is a business structure where the business is owned by 2 or more people. Each partner is only taxed once at the personal income level. It’s also important to understand that each partner has an equal say in all decisions.
Limited Partnership (LP)
This is another legal business structure when there are 2 or more owners. The key difference between limited partnerships and general partnerships is that limited partners are only liable for the amount of capital they have personally invested in the company.
Limited Liability Company (LLC)
This type of business structure combines many of the aspects of a partnership with those of a traditional corporate legal structure. The key thing to note is that an LLC protects owners from personal liability for the debts and legal liabilities of the company.
Be sure to check out this guide to setting up single member llc.
Limited Liability Partnership (LLP)
This approach to structuring a business is typically exclusive to specific licensed professions, such as law firms or accounting firms. The key thing to remember about an LLC is that each partner is only responsible for their own personal conduct.
An S corporation is only taxed once, at the shareholder’s personal income level. Plus, S corps are allowed to issue stock to a maximum of 100 shareholders, though each shareholder must be a citizen of the United States.
C corps are the most common type of corporation. The biggest drawback is the fact that a partner in a C corp will be taxed twice, once on corporate income and a second time at the personal income level.
This is a business structure where a single individual owns the entire business. The main advantage of a sole proprietorship is simplicity.
A joint venture is a structure where 2 companies merge in a single business entity. This allows them to share resources.
A Newbie’s Guide to Business Structure Types
Making the decision to jump into the wild and exciting world of entrepreneurship is something you’ll never regret. Fortunately, this guide to the most common business structure types will help make your journey from startup to massive success a little easier.
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