|
|
Types of Organization
When organizing a new business, one of the most important decisions to
be made is choosing the structure of a business. The common business structures
are 1) sole proprietorship, 2) partnership, 3) corporation, and 4) the
limited liability company. The advantages and disadvantages of each are
discussed below.
Sole Proprietorship
This is the easiest and cheapest way to start a business. A sole proprietorship
can be started by simply finding a location and opening the door for business.
There may be fees to obtain register a business name, a fictitious name
certificate and other necessary licenses. Attorney's fees for starting
the business will be less than the other business forms because less preparation
of documents is required and the owner has absolute authority over all
business decisions.
Partnership
There are several types of partnerships. The two most common types are
general and limited partnerships. A general partnership can be formed
simply by an oral agreement between two or more persons, but a legal partnership
agreement drawn up by an attorney is highly recommended. Legal fees for
drawing up a partnership agreement are higher than those for a sole proprietorship,
but may be lower than incorporating. A partnership agreement could be
helpful in solving any disputes. However, partners are responsible for
the other partner's business actions, as well as their own.
Corporation
A business may incorporate without an attorney in most states, but it’s
smart to get legal advice. This is the most complex and costly business
organization. Control depends on stock ownership. Persons with the largest
stock ownership control the corporation. With control of stock shares
or 51 percent of stock, a person or group is able to make policy decisions.
Control is exercised through regular board of directors' meetings and
annual stockholders' meetings. Records must be kept to document decisions
made by the board of directors. Small, closely held corporations can operate
more informally, but record-keeping cannot be eliminated entirely. Officers
of a corporation can be liable to stockholders for improper actions. Liability
is generally limited to stock ownership, except where fraud is involved.
Many small businesses incorporate as an "S" corporation because
it offers tax advantages over a standard corporation..
Limited Liability Company (LLC)
An LLC is a business structure that combines the best features of partnership
and corporation business structures The LLC itself is not taxable; as
with partnerships or sole proprietorships, LLC owners report profits or
losses on their personal tax returns. As with a corporation, LLC owners
are protected from personal liability for business debts and claims; this
is where the “limited liability” name comes from.
For most start-up businesses, I recommend either a sole proprietorship
or LLC.
See our Ordering Information page for info
on how to procure our services.
|
Call 803-275-0663
or E-mail pcs@porterfieldcs.com
for more info.
|
