There are many options for structuring your business. Whether you are just starting up or are considering a change for your existing business, start by learning about the different types of ownership structures to see what may be right for you.
SOLE PROPRIETORSHIP - Ownership by one individual; a sole proprietorship is easy to get started and allows you to maintain total ownership, no matter the size of your business. However, you are directly responsible for all the business’s liabilities, potentially putting your personal assets at risk.
PARTNERSHIP - Any type of business with more than one owner involved. Ownership, including income, debt and liability, is shared equally among all partners. A partnership can make it easy to pool assets together to launch your business and share responsibility. However, each partner is a direct owner, which makes each of you directly liable for debts, losses and liabilities.
LIMITED LIABILITY PARTNERSHIP(LLP) - Similar to a partnership, but one or more partners has limited status. Limited partners enjoy limited liability, invest capital and share profits, and are not involved in the daily operation of the business. In addition, an LLP allows for the company to distribute dividends among many shareholders.
LIMITED LIABILITY COMPANY(LLC) - Allows for all owners to enjoy limited liability and certain tax advantages. In an LLC, profits do not have to be allocated based on ownership percentage, so there is more flexibility for profit distribution. However, you are not able to pay yourself “wages” and can only receive profit distributions or guaranteed payments.
CORPORATION - A legal entity separate from its owners. A corporation can have its own bank accounts, enter into legal commitments, engage in business and acquire property and assets. All owners, known as “shareholders,” enjoy limited liability that protects their personal assets. This structure is useful for companies looking to attract investors. Forming and managing a corporation requires following legal “rules of operation” that can be complex and requires careful consideration.