Business Formation

What Are Some of the Types of Business Structures to Choose From When Forming a Business?

When forming a business, the entrepreneur may select from several different types of structures:

  • Sole Proprietorship
  • General Partnership
  • Limited Liability Company (LLC)
  • Limited Liability Partnership (LLP)
  • C Corporation and
  • Sub-chapter S Corporation

The differences between each of these business structures center around a few main issues, including taxes and the personal liability of the business shareholders. Regarding taxes, the business structure selected will determine whether business profits may be passed through to the shareholders (i.e., profits are subject to only one level of taxation at the shareholder level) or whether business profits will be taxed at the business level and again at the shareholder level, if such profits are distributed to the shareholders. As for the liability issue, the business structure selected will also dictate whether shareholders will be liable for the debts incurred by the business or whether the shareholders will only be risking the capital they paid to purchase equity in the business.