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Business Structure

Choosing a Type of Business
Selecting a Business Structure
Web Resources

Choosing a Type of Business
It takes many steps to create a product, deliver it to its selling point, and get it into the hands of the consumer. You will have to decide which part of this process interests you the most.

If you have an idea for a new product, perhaps you'll want to run a manufacturing company. Other options may be to operate a wholesale or retail business to distribute the product to consumers.

If you're in the service industry, you'll have to decide what mixture of services to provide. For example, if you want to start a business in auto mechanics, will you opt to provide a full range of repair services to your customers, or simply perform basic maintenance procedures?

Determining what is needed in your area will help you to form the type of business that's right for you.

Selecting a Business Structure
You may legally structure your business as a proprietorship, partnership, corporation, or limited liability company. Each type carries with it financial advantages and disadvantages. Read ahead to learn more about each type:

Sole Proprietorship
Partnership
Corporation
Limited Liability Company

Sole Proprietorship
If you are the sole owner of the company, you'll want to form a proprietorship. This is the most common type of business in the United States. A sole proprietorship is easy to create and inexpensive to operate. All the profits belong to the owner, who then pays taxes according to his or her personal income.

A disadvantage to owning a proprietorship is that the owner must raise all the capital for the business, without the help of investors. Also, the owner is liable for the debts of the business and the company terminates when the owner dies.

Partnership
Partnerships are similar to proprietorships. In this business structure, two people combine their talents and resources to form a company. Sharing the risk of owning a business with another person may be advantageous. The partners receive all of the profits and pay taxes on what they report as income.

A disadvantage is that all partners are liable for all debts and the company terminates at the death of the partners.

Corporation
Corporations are large, publicly-held companies that sell stock to raise capital. Therefore, the stockholders are only at risk of losing the amount that they have invested in the company. Theoretically, a corporation could continue to run forever, as its owners are the stockholders.

Corporations are generally subject to double taxation. This means the profits reported by the corporations are taxed, as well as each stockholder's share of those profits. There are different types of corporations, each with their own advantages and disadvantages.

Limited Liability Company
Another popular business structure is the limited liability company. This entity is taxed like a partnership, but its owners are not responsible for the company's debt. The double taxation that occurs in corporate structures can be avoided in a limited liability business.

As you can see, there are several ways to structure a business. It is recommended that you consult a lawyer for further advice on choosing which one is right for you. You can also find more information on the web:

Web Resources

Self -help Law
Learn more details about business structure from Nolo.com. This self-help law center has gobs of invaluable information for business owners.

Take a quiz
BusinessLaw.gov has a wizard that will suggest a business structure for you! Take the quiz to find out which structure is right for you.

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