To the uninitiated, all businesses may seem “the same” on an organizational level. You have your owners, managers and workers, and the company sells a product or service to customers in exchange for money. But this is an extremely shallow view of business, and one that entrepreneurs know isn’t true. Running a company is incredibly complex, and it behooves entrepreneurs to know that there are a number of business structures they must choose from before they get their company off the ground.
One of the most common business structures is the sole proprietorship. This is, as the name suggests, simple, No papers need to be filed for this, but you also won’t have any legal protections that other business structures offer. Business profit would be taxed as your personal income, and you would be liable for any business liabilities. Partnerships fall into this category too, as they just sole proprietorships but with two or more people.
The business structure that offers more legal protections to people are limited liability companies and corporations. A limited liability company (LLC) provides protection for the owners from personal liability if the business accrues serious debts. What it can’t do, though is shield you from taxes. LLCs are not their own tax entities. Corporations are, and this is why many business go this route. It establishes the business as its own separate tax entity.
Your business structure is incredibly important, and for entrepreneurs it is critical to consult with professionals to ensure you are implementing your business appropriately.