Kathy A Wright
January 26, 2015
This is the simplest business structure. It is run by one individual who handles all management and owner dealings. This very nature allows for no agent conflict that can be seen in other business structures. There is very little federal regulation for a sole proprietorship but there is full liability for the proprietor, so if the organization goes bankrupt the creditors can go after the proprietor's personal property as well as the company's assets.
The partnership has a couple of different ways to be established. The partnership will always have two or more individuals involved. The partnership can be set up so that there is no protection from negligence on the part of the other partner or from creditors if the company should go bankrupt, very similar to a sole proprietorship in this aspect. The partnership in this form has the partners account for profits and losses in their individual income taxes.
The partnership can also be set up so that so the partners are only liable for the amount that they invested in the company. Again this does not stop creditors from going after the private assets of the partners in the amount that each invested in the company. This is considered a Limited Liability Partnership, which is fairly new structure. There are three different types of partnerships: General partnership, limited partnership, and joint venture. All of these will be easy to set up, allow for the sharing of skills of each partner, and allow for incentive to employees. The partnership does have downfalls in that there can be disagreements between partners, and there is a sharing of profits.
LLC-Limited Liability Corporation
The limited liability corporations are a mix of both a corporation and a partnership. This mix allows for the tax benefits of a partnership so that the members are not double taxed. It also allows for a limited record keeping and limited liability to all members. There are three different types of tax options depending on the LLC classifications. Example, if the LLC is set up like a sole proprietorship the owner would file a Schedule C just like an independent contractor.
The most complications and longest lasting of all business structures are the corporations. They are legal entities set up by state charter. When a group is looking at setting up a corporation they must review each state's requirement to…