Which Type of Business Is Best?
As you’re thinking about which industry your small business idea fits into, you should also think about which type of business yours will qualify as. Bear in mind that no specific type of business is superior to any other, simply that some may be a better match for you than others. Learn more about the different types of taxes, control, and liability you’ll have over a specific type of business.
If you like the sound of being separate from the company you own, then you might be interested in starting a corporation. Corporations are subject to very specific tax laws, so make sure to refer to the laws of the state in which you’re opening the corporation to see how you need to go about forming it legally.
According to 2290tax.com, a sole proprietorship is a company that has a single owner and is not a corporation or an LLC. A sole proprietor can be a self-employed individual or an independent contractor. The individual takes full responsibility for all business profits and losses as well as all personal liability for the business lawsuits and debts. Individuals who work as freelancers are often considered to be sole proprietors.
Subchapter (S Corporations)
Subchapters are considered to be corporations that have the limited liability of a regular corporation but are taxed as a partnership. The individual shareholders of S corporations are also responsible for the corporation’s losses.
Professional Corporations (PCs)
Professional corporations are intended for architects, accountants, attorneys, and other professionals. Depending on the state, the group of professionals might be able to create a corporation with each individual being solely responsible for his or her professional misdeeds.
Limited Liability Corporations (LLC)
Rather than an actual corporation, an LLC has the liability safety of a corporation in addition to ease of formation and other benefits. It’s possible for an LLC to be created with a single individual who is responsible for taxes. There are also LLCs with several members who are required to pay taxes in the same way as a partnership. If you are thinking about forming an LLC of your own, make sure to look into the disadvantages verses the benefits, so you are well informed when establishing your business.
Partnerships are a type of business in which the risk and benefits are equally shared with the partners. The general partners are responsible for the actions of the partnership as well as the partnership debt liabilities. There might also be limited partners who act as investors but don’t participate in the everyday operations of the business.
Before establishing a business, take a close and careful look at the different types of businesses in this article and which might be the best fit for your business goals. Not only do you want to think short-term, but consider your long-term goals in order to reap the full benefits of your business venture.