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Published on 3/26/2020 additional information available

The Success of Small Business Structures Mystery Revealed



All entrepreneurs must understand which business structure offers them the advantages that will save them money and help them grow. Choosing a legal structure that is best for your business requires knowledge of your line of work, and an understanding of local, state, and federal laws. Tax laws are continuously evolving every day, and the need for capital flow is never-ending.

Each form of business structure is unique. Hence, understanding each structure and its features is crucial for you to decide the best legal structure for your business.

The most popular type of business structure includes sole proprietorships, partnerships, limited liability companies, corporations, and cooperatives. 

Here’s more about every kind of legal structure. 

Sole Proprietorship: With a sole proprietorship, a single person is responsible for all of the company’s profits and debts. It is the most common form of a small business structure. 

Few benefits of this business structure: 

  • Easy setup. If your a single owner of your business, then this is the best structure for your business. A sole ownership business is the simplest legal structure to set up. The paperwork is since you have no partners or boards to answer.
  • Low cost. Costs may vary depending on which country or state you live in, but usually, the only fees that come along with a sole-proprietorship are fees for your licenses and your business taxes.
  • Tax deduction. As you and your business are a single entity, you are eligible for certain business tax deductions, such as a health insurance deduction.
  • Easy exit. As a single business owner, you can dissolve your business at any time with no formal paperwork required. Just stop your operations and advertising your services. That will be all!

Partnership: Two or more individuals own this business structure.

The cost of a partnership business structure varies. There are two types of partnership structure: a general partnership, where all is shared equally, and a limited partnership.

Few benefits of this business structure: 

  • Easy to form. Similar to a sole proprietorship, there is also very little paperwork to file. A business license is required.
  • Growth potential. Bankers prefer two different credit lines rather than one. You are more likely to obtain a business loan when there’s more than one owner. 
  • Special taxation. Both partners report their total income or loss on their individual income tax returns. Each owner brings various levels of experience and working capital to the business, which affects the ultimate profit each partner will share of the business and their contribution. 

Limited liability company (LLC): Under an LLC, members are guarded against personal liability for the debts of the business until it is proved, they acted in an illegal or unethical in carrying out the business operations. This structure limits the personal liabilities while enjoying the tax and flexibility benefits of a partnership. 

Corporation: There are various kinds of corporations, such as C Corporations, S Corporations, B Corporations, closed corporations, and non-profit corporations. The law considers a corporation as an entity separate from its owners. The company boasts of its legal rights, independent of its owners. It can sue or get sued, own or sell property, and even sell the rights of ownership in the form of stocks. 

The business structure is ideal for businesses that are further along in their growth, rather than a startup based in a living room. 

Cooperative: It offers benefits to the company’s members, also called user-owners, who vote on the organization’s mission and direction and share profits. A cooperative(co-op) is owned by the same people it serves. 

Members become an integral part of such a business entity by purchasing shares.

Best business structure planning requires sheer dedication and the ability to make the right decisions at the right time. Understand your options better and be logical about it, and you’ll be confident in your decision. “To be the best, you need to be with the best.” If it is the first time starting a venture, you need to be very careful about your legal and compliance structure. ONPASSIVE gives you access to its tools that will help you decide the best business structure for your business.



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