What are the benefits of different business structures?
When you're getting ready to start or change your business, one area to consider is what business structure you'll use. Though there are many different options available, some may not be the best choice for your situation, while others offer a wide range of benefits that can help you grow your business more quickly. Here's a quick overview of business structure types and the benefits and drawbacks of each:
Sole Proprietor: A sole proprietor is created when one person goes into business and doesn't bother setting up any further organization. That's one of the reasons it's one of the most common in the United States. However, it also leaves the owner's personal property at risk of liability. If something happens and your business loses a lawsuit, you could have liens put on your home, car and other property.
Partnership: When you want to go into business with someone else or multiple other people in your industry, a partnership is a common way to form a company that shares responsibility across the partners. A partnership should always have a partnership agreement document in place, which determines what happens with the business in a variety of situations, agreed to by all partners.
LLC: A limited liability company is a legal structure that allows you to avoid having problems with your personal property or the amount of liability your company has in a lawsuit. Beyond the legal structure, your company would operate as a partnership or corporation for the most part.
Corporation: Corporations require specific documents and processes to establish, but provides the best separation between your personal and business life. It will require having shareholders and a board of directors, but can still be owned and operated by a single individual if you prefer. However, unlike partnerships and sole proprietorships, it's taxed directly.
By knowing the basics of the different types of business structures, you can make intelligent decisions about which one is right for your enterprise. But how do you start the process of forming one of these structures? If you don't have the time to do further research on that type or have multiple types that would work for your company, please feel free to contact us today. At Accountrely, we've helped many companies through this process and are happy to be of service.