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Business Structures Examples Sole proprietorship, Corporation, Partnership, and LLC
- Business structure is essential for starting a new business to determine profit-sharing and personal liabilities.
- The structure decision can impact day-to-day operations, personal liability, taxation, paperwork, and other aspects.
- Common business structures include sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).
- Sole proprietorship offers complete control, easy setup, simple tax reporting, and privacy, and is best for low-risk businesses.
- Partnership allows shared finances, combined knowledge, and flexible management, but personal tax returns also reflect the business's profits.
- Corporation requires more regulations, record-keeping, and tax requirements, but offers liability protection, simple ownership transfers, and cash accounting.
- S corporations pay one level of federal tax and shareholders are not taxed at the corporate tax rates, and offer simple ownership transfers, cash accounting, and liability protection.
- LLC combines features of both partnership and corporation, ideal for medium- or high-risk businesses, and offers limited liability, pass-through taxation and added shareholder participation, and flexible distribution of profits.
- Choosing the best structure requires considering aspects like the number of owners, liability protection, taxes, regulations, and growth potential.
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