Types of Business Entities/Structures
What is a corporation?
- A corporation is an independent legal entity that exists separately from the people who own, control and manage it.
- It does not dissolve when its owners (or shareholders) die because it is considered a separate “person.”
- A corporation can enter into contracts, pay taxes, transact business, etc.
- The owners have limited liability.
- Contact an attorney or an accountant to determine if this structure works for you.
What is a limited liability company?
- A limited liability company (LLC) is similar to a corporation, but with slight differences.
- Like a corporation, it offers limited personal liability.
- An LLC is not required to hold regular stockholder or management meetings, and there are no requirements to comply with other corporate formalities.
- Contact an attorney or an accountant to determine if this structure works for you.
What is a partnership?
- A partnership exists when two or more persons co-own a business and share in the profits and losses of the business.
- Each of the co-owners or partners contribute something, usually money or real property, to the business endeavor.
What is a general partnership?
- A partnership where the rights and responsibilities are divided equally among the partners.
- The partners are referred to as general partners because each partner can act on behalf of all the partners, and each partner is responsible for the partnership’s debts and obligations.
- Contact an attorney or an accountant to obtain more information.
What is a limited partnership?
- A partnership composed of both general and limited partners.
- This type of partnership allows each partner to determine and/or limit his or her personal liability.
- Unlike general partners, limited partners are not responsible for the partnership’s actions, debts and obligations.
- General partners have the right to manage the business. Limited partners do not.
- Both general and limited partners benefit from the business’s profits.
- Contact an attorney or an accountant to determine if this structure works for you.
What is a sole proprietorship?
- A sole proprietorship is the simplest and most common structure chosen to start a business.
- It is an unincorporated business owned and operated by one individual with no distinction between the business and the owner.
- Sole proprietorships, when not operating under the owner’s legal name, must register a fictitious name with the Division of Corporations.
- Contact an attorney or an accountant to determine if this structure works for you.
