Types of Business Organization
|
| Sole Proprietorship | Corporation | Partnership | LLC |
|---|---|---|---|
| Owned by one person | Owned by one or more people | Owned by more than one person | Owned by more than one person |
| Must be owned by an individual | Can be owned by individuals or other businesses | Must be owned by individuals | Can be owned by individuals or other businesses |
| Not a separate legal entity | Separate legal entity | Usually not a separate legal entity | Usually not a separate legal entity |
| Company name not legally protected | Company name usually legally protected | Company name not legally protected | Company name usually legally protected |
| Personally liable | Not personally liable | Personally liable | Limited liability |
| No additional business taxes & fees | Additional business taxes & fees | No additional business taxes & fees | No additional business taxes & fees |
| Equity divided by owners according to how many shares they have in the company | More flexibility in how equity is divided among owners than in a corporation |
If you are a single owner trying to decide which kind of company to start, the two types of companies you would consider are a Sole Proprietorship or a Corporation.
In a Sole Proprietorship, you are doing business under your company name, but you are personally liable to all business creditors, lawsuits or anything else regarding your company. However, you do not pay additional company taxes and fees.
In a corporation, you are not personally liable to company creditors and such, but you do pay higher taxes to operate as a corporation.
If you are a U.S. citizen or resident and your business is small enough to qualify for S Corporation sub-chapter status, your taxes and fees are not as high as with a general corporation.
In order to become an S corporation, you would first open a corporation and then apply separately to operate as an S corporation.
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