Business Structure Attributes

Business Structures

When someone is deciding to start a new business, several questions must first be answered before anything else can happen. One of the most important aspects to consider is the structure of the business. Business structure must be carefully chosen as each has its own advantages and disadvantages and can drastically alter how the company does business. The following details the various structures for businesses and the pros and cons involved with each.

Sole Proprietorship

In this structure, the business is owned and operated by one person. The good thing about a sole proprietorship is that the owner has complete authority to do what he or she pleases. There are no arguments over how to spend money improving the business, there is also very little regulation from government. With complete authority, however, comes complete liability for the businesses actions. Being the only owner of a business means you can do what you want but when something backfires the blame will be placed squarely on your shoulders, meaning the owner has the responsibility to take care of all debt and other obligations.

Partnership

Partnerships involved two or more people teaming up to further their business interests. In this scenario, partners share the responsibility of operating the business and also share liability. This can be a gift and a curse, while it is nice to not have all the blame fall on one person, if one partner makes a mistake the other partner can also be held accountable for that person’s actions. Also, partnerships offer no personal asset protection, meaning creditors can pursue a person’s personal property to cover a business debt.

LLCs

A limited liability company allows for limited liability protection from things such as debt. LLCs give owners a choice on how to divide company profits, which in turn allows them to move their profits and losses around to ensure the best tax benefit possible will come their way. The issue with LLCs is that...