When beginning a business, you must decide what form of business entity to establish. Your form of business determines the amount of regulatory paperwork you have to file, your personal liability regarding investments into your business, and the taxes you have to pay. The most common business structures include:
- Sole Proprietorship - A business owned and managed by one individual who is personally liable for all business debts and obligations.
- Partnership - Two or more people share ownership of a single business.
- Corporation - A legal entity owned by shareholders.
- S Corporation - A special type of corporation created through a tax election. An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation.
- Limited Liability Corporation (LLC) - A relatively new, hybrid-type of legal structure that provides the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership
- Non-Profit - An organization engaged in activities of public or private interest that are motivated by making a profit. Some non-profits are exempt from paying federal taxes.
- Cooperative - A business or organization owned by and operated for the benefit of those using its services. Cooperatives are not a legal structure.
Visit these resources to learn more about which business structure is right for you:
Guide to Choosing a Business StructureSource: Business.gov
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