Business Structure

Business Structures

Erica Stubbs

FIN/571

April 4, 2016

Gurprett Atwal

Business Structure

There are three types of corporations: sole proprietorship, partnership, and corporation. Each one of these holds a significant background, however, “selecting the right type of company or corporation for your new business helps maximize your chances of financial and operational success” (Business Entity Types, 2016).

A Sole proprietorship is the most inexpensive way to start a business with a group of members. This is one of the easiest ways to obtain the business name and certificate. The con to having a sole proprietorship is that you are liable for what happens with the firm. A Partnership is co-ownership. Either you have a written agreement or only limit the investor to only what the investor invests into this business. However trusting your partner is the biggest task to maintain. Making sure that your partner knows its responsibility and roles. Corporations have three subdivisions which include: General, Subchapter and Limited Liability Corporations.

General Corporations

* Separate Legal Entity

* Owned by stockholders

* Unlimited number of stockholders

* Shareholders are protected from business creditors (ie business debt).

Want to make sure that you have an attorney for paperwork. Corporations are harder to start and have more steps. If the company plans to get bigger, the organization can have their assets protected more

Subchapter S Corporation

* Special IRS Tax Status

* Mostly used by small business

* Provides tax advantages

PROS of Subchapter S – Tax Savings, Business Tax credits – independent life (if the shareholder leaves the corporation the business isn’t disruptive much).

CONS of Subchapter S– Stricter operation process, Shareholders compensation requirements

Limited Liability Corporation (LLC) – The Entrepreneur

* Not a corporation

* Similar to an S Corporation

* Added Flexibility

*...