Business Structure Types

While you’re in the outset stages of starting your new business, one of the primary choices you’ll make is which company structure to choose. This is an important decision, as it has an effect on the income tax structure of your own business, and decides which forms you’ll post to the Internal Revenue Service (IRS).

Sole Proprietorship

Sole Proprietorships are companies owned by a single person, or a wife and husband. They are the most frequent form of business structure for small and micro companies. Allow flexible control over your business. It is the simplest type of business structure. You’re personally accountable for any financial obligations accrued by your small business.


A Partnership consists of two or more business partners. Each partner contributes to the business financially and by contributing skills or labor. Partners share in the profits from the business, and are also accountable for the losses and debts. There are 3 kinds of partnerships. Here’s information regarding each:

1) General Partnership:

This company framework assumes that each companion is similarly invested in the company-he has provided the same financial investment, works the same amount of time in the business and will receive equal shares of income, as well as being equally accountable for debts and deficits. If all companions don’t have equal stakes in the industry, the various rates should be obviously specified by a Partnership Agreement.

2) Limited Partnership:

This structure works well with partners who are unequally invested in the business, both financially and in terms of labor and abilities. The liability of each partner depends on his percentage of the investment. Partners may be free from debt that other partners accrue. This composition is well-liked by partners in professional fields such as sales or law.

3) Joint Ventures:

They are generally used when the business will take on just one project, or will be a short lived endeavor. The business structure can later be changed into a continuing alliance.


Corporations are certainly more challenging business components. They are challenging, requiring much paperwork and organization. Corporations often retain lawyers to assist with paperwork and other legalities. Corporations secure stakeholders from individual responsibility. Stocks of the corporation can be offered to the general public, creating many shareholders. Corporations are considered entities on their own. Non-profits can be Corporations, as well as for-profit companies.

Limited Liability Corporation (LLC)

Limited Liability Corporations are a mixture of Partnerships and Corporations: An LLC could be owned by one or more people (some states have certain principles regarding the number of people permitted for an LLC). Entrepreneurs are not personally accountable for the debts and deficits of the company that are acquired by other associates. The LLC is not taxed. Rather, every person owner gets profits or pays losses, then reviews that earnings or loss when he documents with his personal federal income tax. Articles of Organization and an Operating Agreement spell out the details about how the organization will be setup internally. Organizations in the banking and insurance sectors will not use the LLC business composition.

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