1. Limited Liability Company (LLC)

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Overview:

An LLC is a flexible business structure that provides the liability protection of a corporation with the tax efficiencies and operational flexibility of a partnership. It is one of the most popular business structures for small to medium-sized businesses.

Key Features:

•  Limited Liability: Owners (called members) are not personally liable for the company’s debts and liabilities.

•  Taxation: Profits and losses can be passed through to the members without being taxed at the corporate level.

•  Management: LLCs can be managed by members or by appointed managers.

•  Flexibility: LLCs offer great flexibility in terms of profit distribution and management structure.

Ideal For:

Small to medium-sized businesses that want liability protection and operational flexibility.
 

2. Corporation (C-Corp)

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 Overview:

A C-Corp is a legal entity that is separate from its owners. It offers strong liability protection, and unlike an LLC, a C-Corp can issue stock, making it easier to raise capital.

Key Features:

•  Limited Liability: Shareholders are not personally liable for the corporation’s debts and liabilities.

•  Taxation: Subject to corporate income tax, and any dividends paid to shareholders are also taxed (double taxation).

•  Perpetual Existence: The corporation continues to exist even if ownership or management changes.

•  Raising Capital: Ability to issue stock makes it easier to raise capital.

Ideal For:

Businesses that plan to raise capital through the sale of stock or those that want the corporate structure’s legal protections.

 

3. Corporation (S-Corp)

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Overview:

An S-Corp is similar to a C-Corp but with one key difference: it has special tax status with the IRS that allows income to be passed directly to shareholders, avoiding double taxation.

Key Features:

•  Limited Liability: Shareholders are not personally liable for the corporation’s debts and liabilities.

•  Taxation: Income is passed through to shareholders and taxed at their personal income tax rates, avoiding double taxation.

•  Ownership Restrictions: Limited to 100 shareholders, and all must be U.S. citizens or residents.

•  Perpetual Existence: The corporation continues to exist even if ownership or management changes.

Ideal For:

Small to medium-sized businesses that want the liability protection of a corporation but prefer the tax benefits of a pass-through entity.

 

4. Partnership

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Overview:

A partnership is a business owned by two or more people. There are different types of partnerships (general, limited, and limited liability partnerships), but all involve shared ownership and responsibility.

Key Features:

•  Shared Responsibility: Partners share the profits, losses, and management responsibilities.

•  Taxation: Income is passed through to the partners and taxed at their personal income tax rates.

•  Liability: In a general partnership, all partners are personally liable for the business’s debts and obligations.

•  Flexibility: Partnerships offer flexibility in terms of profit-sharing and management structures.

Ideal For:

Businesses with multiple owners who want to share management responsibilities and profits.

 

 

 

5. Sole Proprietorship

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Overview:

A sole proprietorship is the simplest business structure. It is owned and operated by one person, and there is no legal distinction between the owner and the business.

Key Features:

•  Full Control: The owner has complete control over all business decisions.

•  Taxation: Income is reported on the owner’s personal tax return, avoiding double taxation.

•  Liability: The owner is personally liable for all debts and obligations of the business.

•  Simplicity: Minimal paperwork and startup costs.

Ideal For:

Individuals starting a business alone, especially if they plan to keep the business small.