| Starting a new business can be a daunting task. There | | | | the other partnerships must report income on personal |
| are hundreds of decisions to be made. Who, what, | | | | tax forms. |
| where, and when are not just for English class | | | | - Corporations: A Corporation is usually viewed as a |
| anymore. Another question that must be answered is | | | | separate legal entity with many of the rights and |
| "What form will my business be?" There are several | | | | responsibilities of a person. The investors have limited |
| factors to be considered and there are pros and cons | | | | liability; shareholders are not responsible for the |
| for each type. In this article, I will try to briefly explain | | | | corporation's debts. The corporation files its taxes just |
| the differences between the business forms. | | | | like an individual. If the corporation makes a profit and |
| - Sole Proprietorship: Most people are familiar with this | | | | distributes dividends, it cannot deduct the dividends |
| type of business. This form is one person or married | | | | from its taxes and the individual recipients must also |
| couple that usually operate the business by | | | | pay taxes. Therefore, a corporation is taxed twice on |
| themselves. This is the "Mom and Pop" type of store. | | | | its earnings. A corporation has other tax benefits that |
| The owner receives all of the income from the | | | | an individual does not. |
| business but is also responsible for all for the liabilities | | | | - "S" Corporation: An "S" corporation provides the |
| that the business incurs. The income or loss is also | | | | owners the benefit of being treated as a partnership |
| reported on the personal income tax of the owner. | | | | on income tax, while also being treated as a |
| Most small businesses are started as this form of | | | | corporation for other purposes. |
| business. This is the easiest of all of the types of | | | | - Limited Liability (LLC): All of the members in a limited |
| businesses to open. | | | | liability company have limited liability for the debts of the |
| - General Partnership: In this type of business | | | | business. This form of business is similar to an "S" |
| organization, there are two or more partners. The | | | | corporation because it is usually treated as a |
| income is split between the partners, usually based on | | | | partnership for income tax purposes, but has the |
| the amount of money or assets that each partner | | | | benefit of limiting the liabilities of the owners. |
| invests in the business and each must report his share | | | | This is a brief description of the types of business that |
| of the income on his personal income tax form. Each | | | | can be operated. Each of them has many more |
| of the partners have unlimited liability for the debts of | | | | variations that are not present in this article and an |
| the business partnership. Another drawback to this | | | | attorney should be consulted to aid you in your |
| type is problems can arise between the partners. | | | | decision. Each form has its benefits and drawbacks |
| However, sometimes another opinion in a decision is | | | | and the decision should be weighed carefully. |
| just what a business needs. | | | | Although corporations allow limited liability to the |
| - Limited Partnership: A limited partnership is similar to | | | | principals, many creditors such as banks, other |
| the general partnership. All of the general partners | | | | companies, and landlords may require a personal |
| have an unlimited liability for the business debts. | | | | guarantee from the shareholders. A partnership may |
| However, a limited partners liability, as the name implies, | | | | be a good decision; although, one of the partners may |
| is limited to the amount of the contribution that he has | | | | be dealing with a "hard head." |
| made to the business. Usually, a limited partner does | | | | Take your time to weigh the pros and cons of each |
| not have as much input as the other partners and like | | | | type of business and pick the one that is right for you. |