Business structures typically are comprised of certain key points that make them different. There are several business structures that have differentiating facets however; there are only six ordinary issues that characterize each business form. The business structures depend upon the number of people involved in the business and the liability assumed by the owners of the business. These are not always the choice of the business owner due to the laws governing certain types of business structures.
What are some Business Structures?
- A business operated and owned by only one person will have the choice of one of these three structures - sole proprietorship, a limited liability, or a corporation.
- A business owned and operated by two or more people have the choice of either a general partnership, limited partnership, or a limited liability partnership.
- Corporations are generally not run by the people who own them. This is why they are considered a separate unit. The corporation is according to the law, "a single body that has its own powers and liabilities" which is not to be mingled with those of the members or owners of the professional corporation.
- A limited liability company (LLC) is a company that has features of the corporation and partnership. Instead of total responsibility for the company the owners have a limited liability for what the company does as well as their debts.
- A business trust is formed by a legal document and is used instead of a corporation or partnership. The business that is run by this unincorporated organization has only limited liability.
What Are the Identifying Differences Between Businesses?
Taxation is certainly one of the more important differences as well as risk and control. These issues are self-explanatory when it comes to the business world. Every company has to pay taxes, there is a certain amount of risk involved and the company has to have someone at the head of the table, so to speak, to control the business. But the taxes are not paid by the business itself. The taxes are the responsibility of the owner of the business who reports them on his personal income tax.
Continuity of existence is only in existence as long as the sole proprietor of a business is alive and running the business or if they decide to sell, which is called transferability. The simplest way is to have an asset purchase agreement and sell the business. A sole proprietorship in the event of the death of the owner is put with the property and distributed according to the will.
Expense and formality is one of the most uncomplicated ways to run a business. The start-up is very affordable. The only time the business must be registered with the state is if the business name is different than the owner's name. When the owner uses their name for the business, it must be in the order of both the first and last name or just the last name.
