The 6 Most Common Business StructuresBusiness Structures

6 types of business structures

As a freelancer, you might not know that there are different ways that you can form your new or existing business. It is vital that you pick the correct formation for your business needs. Here are 6 common business structures and some of the advantages and disadvantages that come with each.

Sole Proprietorship

A sole proprietorship is where you are your business. This is the simplest form of business entity where one person owns and operates the business. The owner is personally liable for all debts and obligations of the business, and the business income is reported on the owner's personal income tax return.

Partnership

A partnership is formed when two or more people join together to carry on a business as co-owners. Partners share the profits and losses of the business, and each partner is personally liable for the debts and obligations of the partnership.

Limited Liability Company (LLC)

An LLC is a hybrid form of business entity that combines the liability protection of a corporation with the tax benefits of a partnership. Members of an LLC are not personally liable for the debts and obligations of the company, and the income and losses of the business are reported on the members' personal tax returns.

Corporation

A corporation is a separate legal entity that is owned by shareholders. The corporation provides limited liability protection for shareholders, and the business's income and losses are reported on the corporation's tax return.

S Corporation

An S corporation is a corporation that has elected to be taxed as a pass-through entity. S corporations provide limited liability protection for shareholders, and the business's income and losses are reported on the shareholders' personal tax returns.

Cooperative

A cooperative is a business owned and operated by the people who use its services or products. Members of a cooperative share in the profits and have a say in how the business is run.

Each form of business entity has its own legal, tax, and operational implications, and it's important to choose the structure that best suits the needs and goals of the business. It is important to note that the information provided in this blog is for general informational purposes only and is not intended to be legal or professional advice. It's recommended to seek legal and tax advice before making a decision.