DETERMINING THE BEST FORM OF ENTERPRISE
There are four main legal structures for business organizations: sole proprietorship, general partnership, corporation, and limited liability company or partnership. Before determining which type of structure meets your business needs, you should understand the advantages and disadvantages of each. The following offers a high-level overview of each, but we recommend that you consult with an expert familiar with the different structures before making a decision. Again, local resources are available to assist you with this.
Sole Proprietorship: This structure allows one person to have sole ownership, control, and responsibility for the business. This is the most common form of small businesses. In addition to generally permitting the owner to retain all profits, a sole proprietorship reduces the applicable legal restrictions and allows a quick and efficient termination of the business if necessary. However, the business owner also assumes full personal liability and can have more difficulty raising capital for a sole proprietorship, compared to other business structures.
General Partnership: General partnerships differ from sole proprietorships in that two or more people are included in the businesses enterprise. Partnerships generally rely on multiple financial and administrative resources, but the owners still bear unlimited liability for all debts and liabilities.
Corporation: Generally reserved for larger businesses, a corporation is a separate legal body that is owned entirely by shareholders. Shareholders are responsible for electing a board of directors that, in turn, operate and control the corporation. Corporations are generally the most difficult to set up due to legal and tax requirements, but once a corporation is set up, there are typically better tax benefits. Plus, because corporations are often considered to be a more serious enterprise, the owner may have more credibility with banks and lenders.
Limited Liability Company or Partnership: Limited liability structures provide the protection of a corporation with the flexibility of a partnership.
Village Planner Jason Zawila in the
Community Development Department at
630-719-4750 or firstname.lastname@example.org
TURNING AN IDEA INTO A BUSINESS REALITY
We have developed a number of helpful resources to walk you through key items such as business plan development, financial support, and local, state and federal regulations.
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