Business Structures
What structures are available for your business?
- Sole Proprietorship
- General Partnership
- Limited Partnership
- S-Corporation
- C-Corporation
- Limited Liability Company (LLC)
Business Structures at a Glance:
Sole Proprietorship
- Simplest form of business
- Sole owner and business are not legally distinct entities
- Owner is usually liable for business debts
General Partnership
- A partnership in which there are no limited partners
- Each partner has managerial power
- Each partner has unlimited liability for partnership debts
Limited Partnership
- Has limited and general partners
- General partners manage & are individually liable for debts of the partnership
- Limited partners are limited in the amount they can lose by the amount of money they invested in the partnership
APPROVED STRUCTURE
S-Corporation
- Corporation that is eligible and elects to be taxed under Subchapter S of the Internal Revenue Code
- Shareholders pay tax on the corporation's income by reporting their pro rate shares of pass-through items on their individual income tax returns
- Owners are legally seperated from the business
C-Corporation
APPROVED STRUCTURE
- An organization authorized by state law, to act as a legal entity distinct from its owners
- Has it's own name and it's own powers to achieve legal purposes, and therefore, is a separate legal entity
Limited Liability Co (LLC)
- A hybrid between a corporation and a limited partnership
- Provide protection from personal liability, just as corporations do
- Receive the tax treatment of limited partnerships, or a C corporation, whichever the members of the LLC desire
APPROVED STRUCTURE
Which business structures are best for building business credit?
The best structure for building business credit is one that:
- Separates you from your business.
- Has it's own tax identification number.
- Separates the debts of the business from that of the owners/officers.
The business structures that will do this are:
- S-Corporation
- C-Corporation
- Limited Liability Company (LLC)
When to use a S-Corporation:
- Owners live in a state with no personal state income tax.
- Have one or two individuals who own the company. (Can be as many as 35)
- Have sales less than $250,000.
When to use a C-Corporation:
- Owners live outside the country.
- Owners live in a state with personal state income tax.
- Several individuals are involved in the ownership.
- Other entities are in involved in the ownership.
- Have sales greater than $60,000.
When to use a LLC:
- Any partnership.
- Owning real estate for investment purposes.
- Have several entities that own the business.
- Looking for complete protection of the owner's personal liability.
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