Main Types of Business

These are the main types of businesses available. They each have advantages and disadvantages. All are presented below.

Sole Proprietorship

The main advantage of choosing sole proprietorship is that it is the simplest to set up and maintain. The owner report s any loss or gain on their personal tax return. The main disadvantage is that the owner is personally responsible for any business debts.

Liability

* The owner is personally responsible for any and all business debts. This means if the owner can't pay for any debts, the creditor can come after the owners personal assets for repayment. This can include the owner's house, cars, boats, ect.

Income Tax

* The business income tax is reported on the owner's personal tax forms. Profits and losses are reported on schedule C on the 1040.

* Day to day expenses such as meals travel and car are deductible.

Longevity

* The existence of the business is left entirely up to the owners. The owners can choose to terminate the business at any time.

Control

* Sole proprietorship means that the owner not only owns the business but also manages it. The owner has total control.

Location

* Depending on the state you may register directly with the state. Although you usually register with the county clerk where the business is located.

Convenience of Burden

* Sole proprietorship generally only requires a license to start. This type is easiest and least expensive of the group.

General Partnership

The main advantage of choosing a general partnership is that it is the simplest to set up and maintain. The owners report s any losses or gains on their personal tax return. The main disadvantage is that the owners are personally responsible for any business debts.

Liability

* The owners are personally responsible for any and all business debts. This means if the owners can't pay for any debts, the creditor can come after the owners personal assets for repayment. This can include the owner's house, cars, boats, ect.

Income Tax

* The business income tax is reported on the owner's personal tax forms. Profits and losses are reported on schedule C on the 1040.

* Day to day expenses such as meals travel and car are deductible.

Longevity

* The existence of the business is left entirely up to the owners. The owners can choose to terminate the business at any time.

Control

* General partnership means that the owners not only own the business but also manages it. The owners have total control.

Location

* Depending on the state you may register directly with the state. Although you usually register with the county clerk where the business is located.

Convenience of Burden

* General partnership usually only requires a license to start. This type is also one of the easier and least expensive of the group.

Limited Liability Company (LLC)

The main advantage to a LLC is the owners have a limited personal responsibility to the company's debts. The main disadvantage is that it is more expensive to set up than a sole proprietorship or partnership.

Liability

* Unlike sole proprietorship and partnerships, as an owner you have limited personal responsibility to the company's debts.

Income Taxes

* The taxes are passed through partnerships

* Gains and losses can be distributed to all members.

Longevity

* The company can become terminated in case of death, bankruptcy, or change of ownership.

Control

* The members of the LLC can either elect to manage the company themselves or hire a professional management team.

Location

* Depending on the state you may register directly with the state. Although you usually register with the county clerk where the business is located.

Convenience or burden

* There are little set up fees and forms.

* More to do to set up than proprietorship or partnerships.

* State and federal laws may not coincide.

S Corporation

The main advantage of an S corporation is that the owners have limited liability to the company's debts. Also the owners report their share of the loss and gain on their personal tax return. The main disadvantage is that it is more expensive than a LLC, partnership or proprietorship and there is a lot more paperwork involved in this setup.

Liability

* The owner's have limited personal liability for the company's debts unless they are involved in management of the company.

* Limits owners liability and offer the tax structure of a partnership

* Limited liability of a corporate shareholder but pay income taxes as if you were a sole proprietor or a partner.

Income

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