The Different Business Structures and How to Choose the Best One for Your Company
In the world of business and finance, there are a lot of things that can be very confusing. So many things are going to be very challenging especially when you’re starting out. There are very many businesses that are usually added every year. You have more than a million startups every year. One of the things that is considered to be very consequential is the kind of business structure you’re going to choose. You’ll realize that your business is going to be influenced a lot by this especially in the future or as you continue growing.
Knowing the differences between the different types of business structures will be a very good place to start. The advantages and disadvantages will also be quite important for you to understand. When you have this kind of understanding, it is easier to make the important decision for your business. While this may seem to be a complicated decision, you can simplify it. You have some options that you can choose from when it comes to business structures. Among the main business structures will be the partnership . The partnership business is basically going to involve some people starting the business together and after that, running the business and sharing the profits.
These partners however are also going to share their liabilities. When it comes to the percentages of sharing of profits and liabilities, it is always very much dependent on the agreements but most of the time, it is equal among the partners. When it comes to the filing of taxes, every partner is supposed to follow up on their profits and losses and do the necessary filing with the IRS. This business structure can be very good for you especially when you have a group of like-minded individuals. The other option you have available will be to consider the sole proprietorship business structure. In a sole proprietorship business, you will have a business being operated by the owner. The income of the business and the income of the owner or the operator is the same.
More than 73% of businesses in the US use the sole proprietorship structure. This kind of business structure however has limited because although it is very simple to run, it also means that expanding can be difficult because of limited financial resources. So many advantages of an LLC are there today and that is why the LLC option or, limited liability company is the other great option you can use today. The LLC usually features separation of liability.