Different Types Of Business Structures

When forming a business, there are many different types of Business Structures you can choose for your company. These business structure types consist of a Sole proprietorship, Limited Liability Company (LLC), corporation, cooperative, partnership, and S Corporation. The few types of business structures that I believe are most significant are an LLC, Partnership, and an S Corporation. There are many similarities and differenced between these three business structures and numerous advantages and disadvantages to each.

A Limited Liability Company, also referred to as an LLC, is a mixture of features from different types of business structures. “It provides the limited liability feature of a corporation and the tax efficiencies and operational flexibility of a partnership.” The owners of an LLC are stated as “members”, but the amount of members, whether it entails of a single individual, being one owner, or two or more individuals varies depending on the state law. The difference in taxation between an LLC and, for example, the shareholders in a corporation, the LLC is not taxed as a separate business entity; all profits and losses are instead reported on each member’s personal federal tax return, similar to a Partnership. Although the federal government does not tax income on an LLC, the individual state might do so depending on the state’s income tax agency. When filing the tax return the LLC files it as being under a corporation, partnership, or sole proprietorship tax return, but sometimes it is automatically categorized as a corporation.

There are numerous advantages and disadvantages to making your company an LLC. There are advantages such as limited liability, less record keeping, the sharing of profits from the company. ...

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Each business structure has many similarities with an almost equal amount of differences in addition to their own advantages and disadvantages. Between the businesses structures discussed, I would prefer my company to be a Limited Liability Company, over both an S-Corp and partnership. Being a limited liability company protects all personal assets, which I believe is extremely important to consider when starting a new company. Although, if the business expands, I would be more interested in the benefits of an S-Corp, being as it is so similar to an LLC, yet you can hold a percentage in stock in a corporation and I believe that the stricter operational process is great to help structure your company and keep up the business-like manner.