Defining Your Business Structures
TEAM OR SOLO?
There are many different forms of legal business structures, and your decision on whether you want to be a sole proprietor or another type of business structure has a ripple effect on many other parts of your business. What form of business you want to structure your company as affects who is a leader and owner in your company, how you file taxes, who is responsible for paying the company’s debt (or liability), who gets the company’s profits and who much, etc. If you are not pursuing a sole proprietorship, meaning that you are not trying to be an individual business owner, you may want to explore whether or not you need to create liability forms for your partners.
You’ll have to make a decision in how you want your company to be formed because each form of business has different tax benefits, ways leadership decisions are made, and even how ownership of debt is distributed.
Sole Proprietorship - (n) a form of organization that has only one owner and no partners. The owner has responsibility for all all debts. The business is not a separate legal entity from the owner.
Corporation - (n) a form of organization that provides its owners and shareholders with certain rights and privileges, including protection from personal liability. This is a separate legal entity from the owner(s).
General Partnership - (n) a form of business in which 2 or more co-owners engage in business for profit. Usually the partners own the business assets together and are jointly, personally liable for business debts.
Limited Partnership - (n) a form of partnership similar to a general partnership, except that in addition to one or more general partners, there can be more limited partners. These partners are only liable on the business’s debts according to their original investment, and they have no management authority. The limited partners, in other words, have some protection of their personal liability.
Incorporate - (v) the process of forming a corporation. The corporation may be a business, a non-profit organization, or even a government of a new city or town.