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If you’re considering opening a business, it is imperative to know the different types of organization forms available to you. We are Business Creation experts in Kendall. The business structure you elect will impact how much taxes your business will pay, influence your daily operation and impact any personal assets that may be at risk. Knowing and understanding the different types of organization forms available will give you an advantage as to what business structure you will choose.
Businesses can be organized in the following different forms:
A sole proprietorship gives you total control of your business. A sole proprietorship is owned by one individual and is not seen as a separate entity but rather as a legal extension of the business owner. This means your business assets and liability are not isolated from your individual assets and liabilities.
Partnership is a stand-alone business carried on by two or more individuals or entities. Partnership is most utilized among group of investors who want to share profits and losses.
There are two common kinds of partnership: limited partnership (LP) and limited liability partnership (LLP).
Limited Liability Company (LLC)
LLC allows you take advantage of both corporation and partnership business structures even though from a legal perception it is neither.
LLC’s protect you from any personal liabilities such as your personal assets. Members of an LLC are considered self-employed and must pay self-employment tax contribution towards Medicare and social security.
Corporations fall into two classes: C corporations and S corporations.
C corporation (C corp) is a legal entity separate from its owners. A C corporation must account all its revenue, expenditures and compute its tax liability form on Form 1120.
S corporation (S corp) is a special type of corporation that’s designed to avoid double taxation. In order to obtain an S corp status we would have to file a special form with the IRS and its shareholders must consent.