If you are looking to start your own business, you should familiarize yourself with the various types of companies available for you to form. By understanding the costs and benefits of each option, you can select the one that’s best for you. There are many different types of companies, so finding one that tailors well to your specific endeavor should not be a problem.
Three of the most common types of companies that people choose to launch are corporations, partnerships, and limited liability companies. Learning about these is the first step in getting to know your options and picking the company structure that is right for you.
Corporations are definitely one of the most widespread types of companies in existence. They have a special characteristic that sets them apart from a number of other business establishments – they are legally independent from their owners. This, therefore, removes liability from their owners’ shoulders. Should the company go under, the owners will not be held responsible for any remaining debts that must be paid out to creditors. They will, however, lose what they have invested in the company.
There are several types of corporations available for you to form. S, C, and non-profit corporations are among the most popular.
Partnerships are another very common form of company. Many people turn to this option because of the tax benefits it offers the owners. Profits are distributed to the various owners without being taxed under a partnership. The downside to a partnership, however, is that unlike with corporations, the business owners are held liable for any legal troubles the company may encounter. For example, they will be held personally responsible for paying back outstanding debts.
Limited Liability Companies (LLCs)
Limited liability companies combine the various aspects of partnerships and corporations. In a sense, they bring together the best of both worlds. Owners are free from personal liability of the company’s debts, but they still see the taxation benefits that partnership owners hold.
LLCs have no restrictions on the number of members they can have. They also have certain restrictions on who can form them. For example, banks and insurance companies are typically restricted from obtaining an LLC classification.