Business structuring includes those aspects and issues that affect businesses, including, business formation, taxation, business dispute resolution, corporate laws, sales or transfers of businesses. It is important, before starting the actual business, to compare the different possible legal business structures available and decide on the best for your business.
Three of the most commonly used business structures include sole proprietorship, partnership, and corporation.
Sole Proprietorship
The sole proprietorship is the most common, and simplest form of business organization. A sole proprietorship is a business owned and managed by one person; inseparable from the business. Taxes on a sole proprietorship are determined at the personal income tax rate of the owner and the business does not pay taxes separately from the owner. A sole proprietorship is an easy and adequate structure for an individual starting a business that will remain small and does not have great exposure to liability.
Partnership
Partnership is a business association of two or more persons. These “persons” can include individuals, groups of individuals, companies, and corporations. Because of these options, partnerships can vary greatly in organization and complexity. Each partner shares directly in the organization’s profits and shares control of the business operation.
Corporation
A corporation is a separate legal business entity. It is owned by an individual or group of individuals. A corporation separate rights and responsibilities and are liable to the processes of law just like individuals are. The characteristics of a corporation are the limited liability of shareholders, management being delegated to a board of directors, ownership by shareholders, transferable shares, and a separate legal identity.
