Small Business Structure Types
Before starting a home based business or small business one needs to decide on structure of small business at the very first instance. Some common small business structures are corporation, sole proprietorship, S corporation, Partnership and LLC (Limited Liability Company) and LLP (Limited Liability Partnership).
Various Small Business Structure Types Explained
Corporations – Corporations may have their own personal assets, secure financing and bank accounts. For income tax purpose, a corporation is usually accepted as different entity of taxpaying.
Partnership – In the partnership structure, relationships exist between more than one person who sets up a business or a trade. Each of them contributes property, skill, money and also expects to divide the profit as well as losses of their business accordingly.
LLC (Limited Liability Company) – LLC (Limited Liability Company) is also known by the name Limited Liability Corporation. It is a very simple structure to start up a small business and is popular because most of its features are similar to partnership. LLC also provides some extra features like advantage of pass through taxation and flexibility of management as compared to partnership. LLC is not corporation but has few protection advantages that are incorporated in a business.
LLP – LLP (Limited Liability Partnership) is same as partnership except that in this one partner will not be liable for actions taken by other partners. In LLP, if one of the partners expires, then Limited Liability Partnership ceases automatically.
Sole Proprietorship – This business structure is one of the simplest ways to establish a small business. In sole proprietorship, business ceases automatically when owner of business terminates the proprietorship or expires.
Non-profit, Charitable Organizations – There are lot of charitable and non-profit organizations and each has its own set of exceptional filing requirements. In simple words, for starting up a non-profit organization one needs to establish and incorporate board of director. To become tax free organization, one needs file an appeal to Internal Revenue Services.
At the end, it can be said that small business structures should be analyzed before starting a home based or small business in order to run business successfully.Return from Small Business Structure Types to Homepage