The Big Set-Up
By Kelley Bell |
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The first order of business is to become a business, and that means deciding how you will structure your company legally. Review this list to find out which one is right for you.
Sole proprietorships are unincorporated businesses. This is the easiest form of business to set up, and the easiest to dissolve. They are often used by freelancers, independent contractors, and cottage industries.
Incorporated businesses (Inc., & Co., etc.) are considered a separate entity from the owner, which provides a measure of legal and financial protection not available to sole proprietorships.
Partnerships are unincorporated businesses that distribute all profits and losses between the owners.
LLCs (Limited Liability Companies) are businesses that permit owners to enjoy limited personal liability for the debts and actions of the LLC, while the other characteristics of the structure are more similar to a partnership, according to the IRS website. Also, some types of businesses are generally prohibited from securing LLC status, like banks and insurance companies.
S-Corporations are similar to a multi-owner partnership, and cannot have more than 100 shareholders.
Nonprofits (501.c3) are corporations formed for charitable, civic, or artistic purpose. Nonprofits generally enjoy a tax-exempt status, but there are obviously profit limits, and not all businesses can be approved.
Originally Published: February 1, 2010
