There are many different ways to register a business depending on the legal protections you want to have and the size of the business you intend to build. Different business structures have their own benefits along with legal and tax implications.
Here are the six most common kinds of business structures and what they mean for a business. If you're not sure which is right for you, your attorney can help as you develop your business plan.
1. Sole proprietorship
A sole proprietorship is a basic business style. You establish the company on your own and are responsible for assets and liabilities accrued by the business.
A partnership is a good idea if you plan to have multiple people running the business. There are a few different kinds, but, overall, they help you structure the business for two or more people to run it. The partnership agreement designates who is responsible for certain actions involving the business.
A corporation is the business structure usually used for those creating larger or established companies. These entities generally have employees and are structured to limit your personal liability.
4. Limited Liability Company
An LLC is a flexible structure that protects your personal assets. The LLC has some features of a corporation but also works well for a small business.
A cooperative is a structure that benefits all the owners or members. A cooperative is typically created to meet a collective need. For example, a farmer's market may be a cooperative where multiple people come together to sell food under one company name.
6. S Corporation
S corporations make sure you don't get taxed more than once. With an S corporation, you are taxed on the personal level. You must be a corporation before you can become an S corporation.
Forming a business takes time, money and energy. It's important that you choose the right kind of business entity to protect yourself and your interests. These are just a few basic descriptions of each kind of entity. Your attorney can help you choose the one that is right for you.