Choice of Business Entities

You have a choice when you form a business or decide to move your business to a different entity. Those choices have distinct advantages and disadvantages. Below is a very brief description of four types of entities. Keep in mind I am not an attorney, nor do I claim to know everything about each business type. I do know enough to give you the basics.

• Sole Proprietorship: This is a self-employed individual who operates a business where all the tax consequences fall on that proprietor, including all liabilities, profits and losses.
• Partnership: This a business where two or more individuals carry on a business together and divide the profit/loss according to the contract they put together. The partnership is a separate entity for tax filing but not tax paying. It is a form of situation where the income, losses, deductions are passed to the partners taxes. There is no liability protection for the partners.
• Corporation: This is a separate legal entity formed through a state charter using articles of incorporation. It is authorized to perform the business activities and individual can including filing and paying taxes, signing contracts, and making loans. It is generally formed through the issuing stock with the corporation. There are two main types ("C") and ("S").
• Limited Liability Company (LLC): This is kind of a combination of partnership or sole proprietorship and the limited liability of a corporation. The two most significant features of an LLC are that it affords the owners some limited liability protection and still acts as a conduit like a regular sole proprietorship.

Posted by Mike Cox

"Successful people want to share how they were successful"

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