When planning a business, you need to make a formal business structure and note that your business structure should depend on the industry. When selecting a business structure, ensure to limit your liability as one of your first priorities.
TYPES OF BUSINESS STRUCTURES ONE COULD CHOOSE FROM
1 Sole Proprietorship
3 C Corporation
4 S Corporation
5 Limited Liability Corporation (LLC)
The easiest business to start is sole proprietorship. This business does not require incorporation forms or fees to pay and does not call for double taxation.
However, this business involves lots of risk because of lack of incorporation. In this case, you are responsible for that happens in the business including your employees’ misconducts.
This is a kind of business structure that requires formal agreement between two or more individuals. In this kind of business, income earned from the business is filed on the individual partners' tax returns. In this kind of business, corporate tax is paid, but no double taxation.
However, the risk involves here is that partners join in bearing the consequences of fellow partners. They share equally the losses and gains.
3 C CORPORATION
This is a business structure where one contributes fund to other shareholders to own a stock in the business. In this kind of business, there is double taxation because the corporate body pays and individual pays from their salaries or bonuses.
4 S CORPORATION
This is a legal entity formed in the same way C Corporation is formed though with added bonus that income flows directly to shareholder’s personal income taxes through pass through taxation. The advantage here is that there is no double taxation and that one’s liability is limited to that of a regular shareholder.
5 LIMITED LIABILITY CORPORATION (LLC)
In this kind of business, benefits of sole proprietorship and corporate are mixed and it’s a state approved business structure. Here, members take turn daily to manage the business.
However, taxes in this business pass through individual members personal income taxes.