The effects of business structures

The right business structure is key

Why the type of business matters

Some business types offer protection, keeping the owner’s personal assets separate from the business’s

This protection acts as a financial safety net, shielding the owner’s personal belongings from being at risk.

Types of business entities

Types of business entities are distinguished by the liability protections they offer

• Sole proprietorship

  • Owned by 1 person

  • Unlimited personal liability

  • Business income is taxed as personal income

• Partnership

  • Owned by 2 or more

  • Unlimited personal liability unless structured as an LLC

  • Business income is taxed as personal income

• Limited liability company (LLC)

  • Owned by 1 or more

  • Owners are not personally liable

• C Corporation

  • Owned by 1 or more shareholders

  • Owners are not personally liable

• S Corporation

  • Owned by up to 1000 shareholders, all must be US citizens

  • Owners are not personally liable

  • Has a board of directors and strict rules for operating

• Nonprofit corporations

  • Founded by 1 or more, but no single person or group owns a nonprofit, as they are considered public organizations governed by a board of directors

  • No personal liability