Corporate Business Structuring

You need a formal business structure when you start a business and the reasons why are usually straightforward. For some businesses, it’s a need to separate personal assets from the business; for others, it’s a desire to lower overall taxes or be viewed as a more credible business. How to structure your business is one of the most important decisions all business owner must make.  Because picking the right structure is critical since that choice can impact how taxes are paid, how much paperwork will need to be filed, also how the business is structured will determine how profits will be distributed.  However, when asked what’s the best business structure for your specific business type, the answers get a little more complex. 

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Business Structures 

Here are the five moth common models used in the marketplace today.


  • SOLE PROPRIETORSHIP

An unincorporated business that is owned by one person who reports business profits on his or her individual tax return. A sole proprietorship is the simplest business structure and is straightforward to start.

  • PARTNERSHIP

An unincorporated business owned by multiple owners, either people or other businesses. Profits are divided among its owners and reported on their tax returns. Common partnership types include general partnerships, limited partnerships, limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs).

  • LIMITED LIABILITY COMPANY (LLC)

An LLC is a hybrid business structure that limits the personal liability of its owners — called members — like a corporation but allows the profits to be taxed on either a member level or the corporate level.

  • S CORPORATION

An S corporation has one class of stock and no more than 100 shareholders, none of whom can be another for-profit business or a person without a green card who doesn’t meet IRS residency requirements. Profits are taxed on shareholders’ tax returns, and shareholders have limited liability.

  • C CORPORATION

A corporation whose profit is taxed once on the business level and a second time on an individual basis when earnings are distributed to shareholders, who have limited liability for the business’s debts. C corporations can have multiple classes of stock and an unlimited number of shareholders.