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Business Structures to Choose
BUSINESS FORMATIONS
Business Formations

When forming a business, the entrepreneur may select from several different types of structures. There are four main types of business formations, and each one has its own advantages and disadvantages. Some are easy and inexpensive to form while others provide you limited liability protection that protects your personal assets from creditor claims and lawsuits stemming from your business operations. Some business owners start off using one type of business formation and then change to a different form as their businesses grow.

Types of Business Formations

Sole Proprietorship

A business that legally has no separate existence from its owner. ... The sole proprietorship is the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

General Partnership

A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits and financial and legal liabilities of a jointly-owned business structure.

Limited Liability Company (LLC)

A limited liability company (LLC) is a corporate structure in the United States whereby the owners are not personally liable for the company's debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship

Limited Liability Partnership (LLP)

A limited liability partnership is a legal entity, liable for the full extent of its assets. The liability of the partners, however, is limited. Hence, LLP is a hybrid between a company and a partnership.

C Corporation

A C corporation is a business term that is used to distinguish this type of entity from others, as its profits are taxed separately from its owners under subchapter C of the Internal Revenue Code.

Sub-chapter S Corporation

An S corporation, also known as an S subchapter, refers to a type of corporation that meets specific Internal Revenue Code requirements. The requirements give a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership

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