For the Stacker who is also an entrepreneur, building a solid business plan is key to building a successful business. Among the many visionary decisions that must be made along the way, choosing what kind of company you will create is an often overlooked, yet crucial, step.
Your future business – be it a small “mom and pop” local market or the next world dominating disruptor – is founded on your passions, your ideals, and your decisions. In other words, everything is on you – for better or worse. Let’s explore a few different company types, and possibly help an entrepreneur who’s on the fence about whether or not to take the leap.
Limited Liability Company (LLC)
A Limited Liability Company is a hybrid business structure that provides the limited liability features of a corporation and the pass-through taxation of a partnership or sole proprietorship. An LLC is created when an individual, group of individuals, or a company files articles of organization with the state in which it will do business. To set up a limited company, you’ll need to file some paperwork with your state and choose a name for your company. There are a few things to keep in mind when naming your LLC. The name must include the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC.” It can’t include words that suggest it’s something it’s not, such as Bank, National Trust, Insurance, etc. You can also run into problems if another business is already using your desired name. Be sure to do a trademark search on the USPTO website to make sure there are no conflicts before filing your paperwork.
The owners of an LLC are called members. The members may be individuals, partnerships, or other corporations. Unlike shareholders in a corporation, LLC members have no personal liability for the debts and obligations of the company. This means that if the company goes bankrupt or into debt, the members are not liable for any money owed by the company. In addition, profits and losses from the LLC pass through to the members and are taxed on their individual tax returns. This feature makes LLCs attractive to small business owners, who can avoid the double taxation of profits that occurs when a corporation is owned by its shareholders.
A C-Corporation is a type of for-profit corporation that is the most common form of business organization in the United States. It is a separate legal entity from its owners and has limited liability for its debts and obligations. C-Corporations are subject to federal income taxation on their profits, and shareholders (owners) of C-Corporations pay taxes on their dividends and capital gains.
The shares of a C-Corporation are freely transferable, which means that they can be sold, traded, or given away. A C-Corporation can have an unlimited number of shareholders, and it can offer its shares to the public. This makes C-Corporations a good option for businesses that want to raise money from investors.
An S-Corporation is a type of for-profit corporation that is similar to a C-Corporation but has some important differences. An S-Corporation is a pass-through entity, which means that profits and losses are passed through to its shareholders and are taxed on their individual tax returns. This avoids the double taxation of profits that occurs when a C-Corporation is owned by its shareholders.
An S-Corporation can have only one class of stock and must have fewer than 75 shareholders. It can’t have any nonresident aliens as shareholders, and all shareholders must be U.S. citizens or resident aliens.
A partnership is a business organization that is owned by two or more people. Partnerships are not separate legal entities, and profits and losses are passed through to the partners and are taxed on their individual tax returns. This means that partnerships are not subject to corporate income taxes.
The partners in a partnership share the responsibilities and risks of running the business. They also share in the profits and losses of the business. In most cases, ownership in a partnership is determined by how much money each partner has invested in the business.
There are two types of partnerships: general partnerships and limited partnerships. A general partnership is owned by two or more people who share in the management and control of the business. A limited partnership is owned by one or more general partners, who manage and control the business, and one or more limited partners, who have no control over the business but share in the profits and losses.
Limited Liability Partnership (LLP)
A Limited Liability Partnership is a partnership that offers its partners limited liability for the debts and obligations of the partnership. This means that if the LLP goes bankrupt or into debt, the partners are not liable for any money owed by the partnership.
An LLP can have an unlimited number of partners, and profits and losses from the LLP pass through to the partners and are taxed on their individual tax returns. This feature makes LLPs attractive to small business owners, who can avoid the double taxation of profits that occurs when a corporation is owned by its shareholders.
A joint venture is a business organization that is formed when two or more businesses come together to form a new business.
A joint venture is not a separate legal entity, and profits and losses are passed through to the joint venturers and are taxed on their individual tax returns. This means that joint ventures are not subject to corporate income taxes.
The joint venturers share the responsibilities and risks of running the business. They also share in the profits and losses of the business. In most cases, ownership in a joint venture is determined by how much money each joint venturer has invested in the business.
The bottom line is that there are a variety of company structures to choose from, and each has its own benefits and drawbacks. It’s important to choose the structure that is best suited for your business and will help you achieve your goals. We hope this article was helpful!
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