3 Types Of Business Structures

There are three main types of business structures. There are pros and cons to each business structure.

The process of starting a business is simple enough. However, it takes dedication and hard work to grow a business. A company is something that you are investing in that is larger than yourself. It can become a vehicle to create generational wealth. These are three common business structures.

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Choose The Right Business Structure

You want to make sure you choose the right business structure when you own a business. This will save you valuable time and hassle further down the road. A business structure provides a way to separate you from your company.

3 Common Business Types

Sole-Proprietorship

The first way you could establish your business is as a sole proprietor. You can have this type of business structure if you start without filing the proper legal paperwork. The danger of being a sole proprietor is it provides you with any legal liability protection. The business and the business owner are the same.

Without legal protection, if a customer were to sue you or the business ended up not working out, you might lose everything. This is why you want to consider having one of the three business structures listed below.

You pay Social Security and Medicare as part of your self-employment taxes. You are your business. Your business and you are the same. This is the self-employed model. Your business and your taxes are the same.

Pros

• You just set up shop.

Cons

• No financial or legal separation between you and your business.

• Responsible for and liable for everything.

• Not legally recognized as a business could create future problems for your business.

• No legal liability protection.

S-Corp

The second type of business structure is the S-Corp. To create an S-Corp, you must fill out Form 2553 and file it with the IRS. Theoretically, the S-Corp can provide the business owner or shareholders with liabilities, such as not being held liable for the corporation’s debts. The business owner will likely be responsible for its debts, especially if it is a small business. Another problem with the S-Corp is that the business owner will be liable for any.