5 Common Business Structures
Starting to step into the business or startup world, You are starting your own startup or business. Then you might be starting on your own as a single owner. Or you might be having a co-founder. The functioning of a business depends on the business structure.
Whenever you are registering a business it is important that thou understand the different types of business structures. Without knowing the types of business structures it is difficult that you can register your business or company. If you select the wrong one you will be in a lot of trouble later and you might not get what you wanted from the business or startup.
While you are registering your own business you might be asked to decide the type of business. This is most important as each type of business have different functioning.
To make it easy for you we have explained the important types of business structures. Understand them clearly before registering the company. Understand clearly what is the best suitable one for you and best a wise decision.
Most Common Business structures
- Sole Proprietorship
- Limited Liability Company
This is the most common type of business and you have very least work involved in this type. This business simply means that you are the sole and only owner of your company. The company is you and you have no one who has rights on the business.
All the profits will be for you and you are responsible for all the operations in the business and you will be the one to face all the losses in the business. All the debts are to be paid by you and you are responsible for all the loans. This involves high risk at the same time 100 percent of profits are yours.
This type of business usually does doest involve a lot of legal work. yo only must have to make sure you comply with all the legal laws and restrictions.
Register the company like this when you don’t want to share the profits and you want to take the entire risk on yourself.
In this type of business as the word itself tell that you will be having a partner. You and your parents will be the owners of the business.
While registering the business you have to register it on the name of both of you, you and your partner. This partnership business structure is to make sure you both have equal rights and have an equal responsibility to the business.
In this type of business, you can have one partner in addition to or more than two partners. It’s up to you. All of you will share the profits and all you are responsible for the losses. And must be responsible for debts and loans.
In this type of business, you will mention what is the percentage each partner owns. According to the share of each person in the company, the profits will be distributed and also the authority will be with those who have the highest percentage. Basically, this division of ownership is done based on many factors like the amount of odd investment of responsibility taken by each person.
This is one of the complex business structures. This type of structure usually refers to sometimes as C Corporation. In this type, the shareholder owns the rights of the business. That is the share of the company is sold and those shareholders who buy the shares are the owners of the company.
So the corporation Not the shareholders is responsible for the operations of the business. This type of business structure is usually followed in the case of large industries involving a large number of employees.
This type of structure involves a lot of legal work and a lot of taxes to be paid. usually involves a lot of legal procedures and complex structures. need a proper study to understand.
One thing is that there won’t be any single owner of the company and three will be multiple owners. Whoever is interested can buy the shares and can become the party of the company.
Limited liability company
Limited liability can be comprehended as the Hybrid of Corporation and partnership. This is the combined legal structure of features of Partnership and Corporation features.
The owners of these companies are simply referred to as Members. these members can be an individual or partners or other LLC’s
Don’t confuse them as shareholders. these structures do not involve shareholders but include the members just like the partnership. The profits from the business are passed through the business to the members. The taxes on the losses and profits of the business are reported in the central taxes of members just like the partnership.
Cooperation simply a business operating for the benefits of the people who are using its services. Some of the types of this type of business structures are Health, agriculture, Restaurants and many more. need to properly study to understand this type of structure.
the profits from the business are distributed among the persons who own the business. These usually include a board of members who make the decisions on the functions of the business and operations. This board is usually elected by the members of the company and the members have the right to select the members on the voting system
These are the basic types of business structure and the most commonly used one. Now you have a basic idea of the types of business. Analyze each type select the best one.
It is worth to be noted that when a company is concerned, these business structures need to be understood clearly. Because as you can see there is a lot of difference between each one of them.