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    Choosing The Best Business Structure

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    Niyati Anand
    This document discusses different business structures including sole proprietorships, partnerships, limited liability companies, and corporations. It provides definitions of each structure and highlights important characteristics like legal liability, taxation, ease of setup and liquidation. Key questions are outlined to help determine the best structure for a business based on its needs and goals.

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    Choosing The Best Business Structure

    Uploaded by

    Niyati Anand
    44 views22 pages
    This document discusses different business structures including sole proprietorships, partnerships, limited liability companies, and corporations. It provides definitions of each structure and highlights important characteristics like legal liability, taxation, ease of setup and liquidation. Key questions are outlined to help determine the best structure for a business based on its needs and goals.

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    This document discusses different business structures including sole proprietorships, partnerships, limited liability companies, and corporations. It provides definitions of each structure and highlights important characteristics like legal liability, taxation, ease of setup and liquidation. Key questions are outlined to help determine the best structure for a business based on its needs and goals.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    44 views22 pages

    Choosing The Best Business Structure

    Uploaded by

    Niyati Anand
    This document discusses different business structures including sole proprietorships, partnerships, limited liability companies, and corporations. It provides definitions of each structure and highlights important characteristics like legal liability, taxation, ease of setup and liquidation. Key questions are outlined to help determine the best structure for a business based on its needs and goals.

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    You are on page 1of 22

    Choosing the Best Business Structure

    Choosing the Best Business Structure

    Lesson Goals:
    Learn the importance of a legal structure
    Discuss four basic forms of business structures

    Choosing the Best Business Structure

    Choosing the Legal Structure of Your Business

    Sole Proprietorship
    Partnership
    Limited Liability Company
    Corporation

    Choosing the Best Business Structure

    Questions You Should Ask


    How easy is it to set up and operate?
    What are the tax advantages and
    disadvantages?
    What are your potential legal liabilities?
    What happens to the business if you should die?
    How easy will it be to liquidate the business?

    Choosing the Best Business Structure

    Choice based on:


    Less Commonly Considered Concerns
    Raising Money
    Regulations Ongoing Operation
    Continuity
    Flexibility
    Record Keeping

    Choosing the Best Business Structure

    Sole Proprietorship
    Definition

    A sole proprietorship is a business owned and


    operated by one person for profit.

    Choosing the Best Business Structure

    Sole Proprietorship
    Characteristics

    Easiest form of business to set up and operate


    Profits are taxed only once
    Unlimited legal liabilities
    Business ends with death of owner
    Easy to liquidate

    Choosing the Best Business Structure

    Formation of Sole Proprietorship


    Easiest Form of Business to Set Up and Operate

    No formal process.
    Obtain all necessary federal, state, and local
    licenses and permits.
    Register Assumed Name Certificate (if necessary).
    Obtain Employer Identification Number (if
    necessary).

    Choosing the Best Business Structure

    Types of Partnerships

    Choosing the Best Business Structure

    General Partnership
    Definition

    A partnership is any two or more individuals who


    contribute money, labor, and skill to a business,
    and who share in its profits, losses, and
    management.

    Choosing the Best Business Structure

    Limited Partnership
    Definition

    A limited partnership has one or more partners


    who have limited liability and no rights of
    management.

    Choosing the Best Business Structure

    Partnerships
    Characteristics

    Choosing the Best Business Structure

    Formation of General Partnership


    Easy to Set Up and Operate

    No formal process required.


    Obtain Employer Identification Number.
    Obtain all necessary federal, state, and local
    licenses and permits.
    Register Assumed Name Certificate, if necessary.
    Partnership Agreement (optional, but highly
    recommended).

    Choosing the Best Business Structure

    Formation of Limited Partnership


    File Certificate of Limited Partnership with
    Secretary of State or other appropriate agency.
    Name must contain the words Limited
    Partnership.
    A written partnership agreement is required.
    Maintain certain records as required by state
    law.

    Choosing the Best Business Structure

    Limited Liability Company


    Definition

    Created by state law


    Cross between a partnership and a corporation,
    with mostly partnership characteristics
    Tax advantages of a partnership
    Limited liability of a corporation

    Choosing the Best Business Structure

    Limited Liability Company


    Characteristics

    Profits are taxed once


    Limited legal liability
    Business may or may not terminate upon death or
    withdrawal of member, depending upon operating
    agreement
    Moderately easy to liquidate
    Moderately easy to set up and operate. Some formalities
    are required

    Choosing the Best Business Structure

    Formation of LLC
    Acquire all the necessary licenses and permits.
    File articles of organization with the Secretary of
    State.
    Pay filing fees.
    Prepare and adopt operating agreement.
    File all necessary reports with the Secretary of
    State.

    Choosing the Best Business Structure

    Corporation
    Definition

    Formed under state or


    federal law. Legally
    treated as an artificial
    person, distinct from the
    individuals who own it.

    Choosing the Best Business Structure

    Organization of Corporation
    Corporate Structure

    Shareholders own the corporation through stock


    ownership.
    Shareholders elect the Board of Directors
    Board sets corporate policy.
    Board elects corporate officers who run the dayto-day operation.

    Choosing the Best Business Structure

    Corporations
    Types

    Choosing the Best Business Structure

    Corporations
    Characteristics

    The most complex form of business to set up


    and operate
    Profits may be subject to double taxation
    Limited legal liability
    Business continues after death of owner(s)
    Difficult and expensive to liquidate

    Choosing the Best Business Structure

    Formation of Corporation
    Most Complex Form of Business to Set Up and Operate

    File Articles of Incorporation with the


    Secretary of State.
    Pay filing and license fees.
    Prepare and adopt bylaws.
    Obtain corporate minute book, corporate seal, stock
    certificates, and other desired supplies.
    Follow corporate formalities.

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