Choosing a Business Structure

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What's the difference between an LLC and other business structures?

Choosing a Business Structure

When you are starting a business, you must choose a business structure. You can select sole proprietorship, partnership, corporation or limited liability company (LLC).

Each business structure has different regulations, fees, liability issues and tax structures.

Sole proprietorship and partnerships are the easiest structures to set up. However in sole proprietorship and partnerships, if the company is sued, the personal assets of the owners can also be at risk. These owners are also personally responsible for the business debts.

Corporations and LLCs both provide personal liability protection to the owners. However the main difference between a corporation and a limited liability company is that corporations can issue and sell shares of stock, LLCs cannot.

Owners of sole proprietorships, partnerships and LLCs all need to report their share of the business profits or losses on their personal income tax returns. These types of owners pay taxes on the company's net profits regardless of the amount of money they may take out of the business.

On the other hand, owners of a corporation only pay personal income tax or their salaries or dividends from the company. The corporation also pays tax on the profit left in the business at year end. Taxes for a corporation are a little more complicated than the other types of business structures.

If you are looking to increase your liability protection and do not need to sell stock, forming an LLC may be right for you.

To get business legal forms for forming a corporation or learning more about business legal issues, please visit



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