In today’s competitive and complex business environment, building the right enterprise is key to success, and it all starts by choosing the appropriate structure under which one chooses to conduct business. There are three basic types of business structures, sole proprietorship, partnership and corporations (Films on Demand, 2011), each with some advantages and some disadvantages that must be carefully considered.
Sole proprietorships are easiest structures to start (Parrino, 2012), it is the simplest legal structure, has the lowest startup fees and provides total control, but the owner is fully and personally liable as it does not separate the business from the person.
Partnerships are agreements between two or more entities, and have different types, the most common being general partnerships and limited partnerships. The main difference between these is that limited partnerships provide some protection to the partner by limiting its liability to the capital invested in the business (Parrino, 2012). There are however disadvantages to the partnership structure as control is limited by the existence of multiple owners, and each owner must be aware of the roles, responsibilities and actions of the other partners.
The most complex business structure in the corporation, and there are multiple types of corporations, general, S types and Limited Liability Corporation or LLC (Films on Demand, 2011). General corporations are the most common, and it creates a separate legal entity owned by investors called shareholders, and is legally protected. The biggest advantage is that your personal assets are protected from liability. One disadvantage is that setting up a general corporation can be complicated and expensive and usually involves help from lawyers. S Corporations are special corporations with the IRS benefits of being treated like a proprietorship or partnership, while maintaining the...