Want to start a new business start-up? If yes, then firstly, you should consider the type of business structure that you will have. From paperwork to taxes, there are so many things to consider while starting a new business. And the type of business you select can impact your personal liability and even your ability to raise money. It is essential to conduct research and careful assessment while selecting the correct type of business. Today we will discuss here the different types of businesses that will help you find the best one for you.
If you wish to work alone, this one is the best option for you. The sole proprietorship is typically the simplest type of business that can be started with only a single person. The individual (who starts the business) or a married couple is responsible for all the profits and debts of the company. This type of business can be incredibly engaging because the income and expenses are included in the income tax record of the owner. With this type of business, you have complete control to make all the decisions.
Partnership – Most Common Types Of Businesses
If you want to hold and operate your business with multiple people, a partnership can be an ideal choice for you. The partnership comes in two forms: general partnership and limited partnership. In a general partnership, all the partners assume responsibility for the debts. However, with a limited partnership, there are both general and limited partners. For instance, the limited partners are investors only, and they have no control over the company and are not subject to liabilities. Besides, the general partners own and operate the business and assume the liabilities.
Limited Liability Company (LLC)
A limited liability company allows owners, partners, and shareholders to limit their secluded liability to protect their hidden assets. This type of business is not incorporated, but it enjoys the limited liability of a corporation. In addition, the limited liability company can be taxed as a sole proprietorship, partnership, or corporation. One of the main benefits of a limited liability company is that there is no limited number of business shareholders. Additionally, any owner or member can have a full participatory role in the operation of the business, but there is also flexibility with the distribution of profits. Profits and losses don’t have to be distributed in proportion to the investor’s money.
The corporation offers the most substantial amount of personal liability protection, but the cost to form a corporation is also very high. They are entirely independent of shareholders and pay income tax on profits, and can be taxed twice in some cases. The corporations have the advantage of raising capital as they can borrow money by selling stock. Stock options can help attract employees.
We have discovered the types of businesses above, and now it is up to you what one you want to start with. But don’t forget that your aim should be to identify the one that allows for maximum profit and the ownership structure.