TYPES OF BUSINESS STRUCTURES
The business structure one chooses influences the whole thing from operation, taxes, to how many personal properties are at danger. (Wilgus, 2016) A business structure must be the one that provides the right balance of lawful benefits also protection.
Comparisons and contrast of the 5 types of business structure.
| Ownership | Liability | Taxes | Pro and cons | ||
| General partnership | Two or more owns the business | In connection to business management, every partner shares the same rights and responsibilities for all companies’ debts and obligations. | Partnership profit is not taxed to the business | Partners gain lower tax returns | |
| Limited partnership | Two or more owns the business | Restricts the partner’s liability to his or her business investment. | Partnership profits are not taxed to the business. | Partner benefits from business profit. | |
| Limited liability partnership | Two or more owns the business | Offer some personal liability protection to the members (Lança,2017). Partners are not responsible for the debts or obligations of the business. | Tax authorities tax the members to none- partnership tax rule. | Partnership profit is not taxed. | |
| General corporation | Three members or more own the business but shareholders, directors, and officers have the power. | Rights and responsibilities are different among the member. Example director manage the business The owner is not personally liable. | Pay income tax on their profits | Protects the owners from personal liability. | |
| Limited liability company | Two or more owns the business | The company limits its liability when it comes to debts and responsibilities. | Personal income is taxed hence the company does not pay the taxes | Pros: no ownership restriction Flexible profit distribution Cons: self-employment tax banking in that you need a business checking account. | |
2 Report
TO: Ali, Madison, Sam and Connor
FROM: Anders
RE: Limited liability company
The best business structure is a limited liability company because it minimizes individual liability as to the company liable for the debts and responsibilities. (Wright, 2019) Also, it minimizes taxes as the partner’s net income is taxed. The company also have no restriction to citizenship foreign are allowed to be the owners. The company has a versatile tax status where one chooses how it is treated as a taxable entity.
Conclusion
The business structure should be chosen carefully as conversion to a different structure may lead to restriction based on your location. The business structure should be chosen before registration to the state. The members also need to have a tax identification number and a file for licenses and permits.
Reference
Wilgus, H., & Dill, J. (2016). The Statutory and Case Law Applicable to Private Companies, under the General Corporation Act of New Jersey, with Corporation Precedents. Michigan Law Review, 1(3), 242. doi: 10.2307/127435
Lança, H. (2017). Dormir com Alguém, Acordar com o Estado. Review Of Business And Legal Sciences, (24), 179. doi: 10.26537/rebules.v0i24.1006
Wright, F. (2019). HBR guide to buying a small business: think big, buy small, own your own company (HBR guide series). Journal Of Business & Finance Librarianship, 24(1-2), 72-73. doi: 10.1080/08963568.2019.1663091