Which Type of Business is Right for My Company?
Deciding on the structure of your business is vital for its success, but many new business owners have no idea where to start when deciding which type of structure is right for them. To make the best decision for your startup business, you should speak with a qualified business lawyer.
What Type of Business Should I Have?
Business owners should know about the different business types and the benefits they could potentially offer growing companies. Here are some prominent types of businesses and their characteristics:
Sole Proprietorship – The most common form of business is a sole proprietorship, which is solely composed of a single owner or married couple. A sole proprietorship is simple to operate and allows an owner to have significant control over the management of the business, along with fewer legal restrictions and typically less taxes than many other types of businesses. The downside is that owners are personally liable for all business debts.
Partnerships – A variety of partnerships are available for aspiring business owners, including general partnerships and limited liability partnerships (LLP). All partnerships include at least two unmarried owners who contribute money, labor and skill to a business venture.
- In general partnerships, partners share the profits, losses and management equally, and each person is equally responsible for company debts.
- An LLP is like a general partnership, but partners are not personally liable for the negligence of other partners.
Corporation – An incorporated business counts legally as an entity separate from its owners, and is one of the most complicated structures available. Owners of corporations may experience limited personal liability along with certain tax and financial benefits, but shareholders exercise a great deal of power over a corporation, which limits an owner’s control over the company. Corporations are also subject to a number of complex regulations.
Limited Liability Company (LLC) – Members of an LLC share in the company’s profits and are not liable for debts incurred by the company. The LLC requires at least one owner and is a relatively easy company to operate. However, in many states, LLCs dissolve when a partner leaves unless a provision in the LLC’s operating agreement states otherwise. The LLC also does not provide the tax benefits associated with a corporation.
Nonprofit Organization or Corporation – A not-for-profit organization typically furthers a goal as opposed to providing income for its owners. A nonprofit organization must ensure it does not act outside of the scope of its mission to avoid legal repercussions. A nonprofit can also become incorporated and largely function the same as any other corporation.
Private Contractor – A private contractor, or independent contractor, is not necessarily a type of business. However, an independent contractor often works for another person or company as a non-employee. You can work as a contractor for a company as an individual or a member of a separate business.
Starting a Business? Get the Right Advice from a Business Lawyer
This information merely scratches the surface of how these different business structures function. The best way to find out how to start or classify your business is to speak with our experienced Hoffman Estates attorneys. Our first priority is you, and our Hoffman Estates lawyers will do everything we can to make sure you are satisfied with our legal services. Call our office today to get started.
