Essay About Types Of Corporations And Different Business Structures

Fin 571 – Business Structure Advice
Business Structure AdviceFIN/571April 11, 2015Dear John Owner,Congratulations on your decision to start a business.  It is definitely a smart idea to be aware and analyze the different business structures, their tax implications, and where the investments come from.  You do have several options to choose from, and each of them have both advantages and disadvantages.  Some of your options include several types of corporations, partnerships, and sole-proprietorship.The first possible business structure is one of the types of corporations.  The General Corporation is the most common type of corporate structure.  The characteristics of a general corporations include being a separate legal entity, owned by stockholders (an unlimited number), that are protected from business creditors.   One option is a type S Corporation,  which is actually a type of General Corporation that has a special IRS tax status.  It is popular with small businesses because they are charged as if they are sole proprietors, as well as combining tax advantages of a sole proprietorship with that of a corporation.    Depending on the type of business you plan on starting, this may be an option for you.  An advantage of the corporation is that the individual’s personal assets are protected.  A disadvantage is that you have to share the profits with all of the stockholders. Another type of business structure that you could form is a Limited Liability Company, or LLC.  There are fewer restrictions and compensation requirements than that of a Type S Corporation.  These are popular because they are among the easiest structure types to attain, and also offers a protection of personal assets that are not present with a sole proprietorship.  The LLC’s owner reports profit and loss on their own personal tax returns instead of a corporate return, similar to the tax reporting for a sole proprietorship or partnership.  Owners report their share of profit and loss on their individual tax returns.