(P2) 10 Types of Business Structures

Sole proprietorship

General partnership

Limited partnership

Limited liability partnership (LLP)

C corporation

S corporation

Benefit corporation

Limited liability company (LLC)

Nonprofit

Joint venture

10 TYPES OF BUSINESS STRUCTURES

sole proprietorship

A _________ is an unincorporated business entity owned and operated by a single individual.

Its main advantage lies in its simplicity: sole proprietorship is the default business entity designation for anyone selling a service or product themselves.

A sole proprietorship requires no special filing. In addition, sole proprietors have complete control over their companies and enjoy a single round of taxation on personal income.

General partnerships (GPs)

Are the default form ofbusiness partnerships, or businesses owned by two or more people.

Like sole proprietorships, general partnerships are subject to pass-through taxation, meaning they are only taxed once, at the partners’ personal income levels.

In addition, general partners are equal participants in the firm, meaning everyone has a say in how the business operates.

limited liability partnerships (LLPs)

The final type of partnership, __________, are owned by two or more partnerswho enjoy pass-through taxation.

While partners in an LLP are liable for their own conduct,they are not personally liable for the conduct of otherpartners or the debts and damages of the business

limited partnerships (LPs)

Similar to general partnerships, two or more people own _______ and enjoy pass-through taxation.

The key difference between LPs and GPs is the existence of limited partners, people have limited liability for the business according to the amount of capital they’ve invested.

Note: All limited partnerships must have at least one general partner, who is subject to unlimited liabilit

C corporations, or C corps

Are among the most common types of corporations and the ideal ownership structure for a large company.

Is a legal entity completely separate from its owners, offering the strongest personal liability protection.

Another advantage is the relative ease of fundraising.

Can be funded by issuing shares of stock. You can issue as many shares as you like and offer both common stock and preferred stock types.

S corporations, or S corps

Sidestep the double taxation issue that C corps face.

Like partnerships, it is pass-through entities, which means that instead of paying corporate income tax as a business entity, they are taxed only once at the owners’ and shareholders’ personal income levels.

Choosing between an S corp or LLC is a common decision for business owners.

benefit corporation

sometimes called a B corp, is a different type of for-profit corporation recognized by most US states.

While they’re taxed the same way as C corps, benefit corporations place added emphasis on making a positive impact on local communities and the environment.

Limited liability companies (LLCs)

Meld many of the characteristics of a partnership with those of a traditional corporate legal entity.

Are distinct legal entities, which helps to protect owners from personal liability for any debts and damages accrued by the business.

An additional advantage of forming your small business as limited liability company is tax flexibility.

can opt to be taxed as corporations (twice) or as pass- through entities like sole proprietorships and S corps.

nonprofit

a business that has been granted tax-exempt status by the US Internal Revenue Service (IRS) on the basis that it advances a social cause benefiting the public.

In essence, nonprofit refers primarily to a business’s tax status, as most nonprofits are also corporations

joint venture

Essentially a partnership between one or more separate business entities.

In these types of business arrangements, firms agree to pool resources toward the achievement of a specific task—often on a temporary basis.

Businesses might undertake joint ventures to win a contract, purchase real estate, or respond to changing industry regulations.

Assess your risk tolerance

Understand tax implications

Evaluate control and management needs

Consider funding options

Consider future growth and scalability

Set personal and business goals

HOW TO CHOOSE THE RIGHT BUSINESS STRUCTURE