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Business Structure Essentials

By , About.com Guide

The choice you make for the structure of your business, whether a LLC or some other form, will have an impact on your business liability, fund-ability and tax implications.

The easiest and most common form of business structure is the sole proprietorship. A sole proprietorship is a business of one without corporation or limited liability status. The individual represents the company legally and fully. Common proprietorship include part-time businesses, direct sellers, new start-ups, contractors, and consultants.

Operating a business with a partner appeals to some small business owners. The road to entrepreneurship can lonely. Greater rewards may result from forming a business partnership. Partnerships offer more freedom for business owners with shared business tasks and the potential to earn greater profits.

A limited liability company (LLC). is a type of business ownership combining several features of corporation and partnership structures Owners of a LLC have the liability protection of a corporation. All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax.

An S Corporation (Small Business Corporation) is a business elected for S Corporation Status through the IRS. This status allows the taxation of the company to be similar to a partnership or sole proprietor as opposed to paying taxes based on a corporate tax structure.

Creating a C Corporation is more complicated than forming a limited liability company or a sole proprietorship, but there are several tax benefits your company could enjoy. A C Corporation has a more complex structure than a limited liability company and reports to a board of directors and shareholders.

Each of these business structures are the main choices for entrepreneurs. As your business evolves from start up to maturity, you should re-evaluate your choice from time to time.

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