One of the first decisions you will have to make concerning your business is what business structure you will use. There are several distinct options that will impact how you run your business, the legal aspects of your business and almost every other aspect of your business. Choosing the right structure is essential to your business success.
According to the U.S. Small Business Administration, there are five main types of business structures. These include sole proprietorship, partnership, corporation, cooperative and limited liability company. There are several aspects you need to consider when making your choice starting with who will be the owner of the business. You also want to think about liability. These two points are what distinguish each option.
The easiest options when it comes to ownership are a sole proprietorship, which is where you own the business, and a partnership, which is where you and at least one other person owns the business jointly.
In an LLC, you can also share ownership with others, but it makes the business its own entity. A corporation is also its own entity and can have various owners, which are known as shareholders. Finally, a cooperative is a business where the people who are customers own the business.
Cooperatives, corporations and LLCs are all separate entities from the owners. Because of this, the business liability is separate from the personal liability of the owners.
With a sole proprietorship, you have complete liability for your business. Partnerships are similar, but because there is more than one owner, liability may vary for each owner depending on the structure of the partnership.