The 6 Forms of Business Organization

Whether you’re in the process of starting a business or still in the “dreaming” stages, it is important for you to know and understand the different types of business organizations. These include:

l  Sole proprietor

l  Non-profit organization

l  C-Corporation

l  Trust

l  S-Corporation

l  Partnership

So, now you may be wondering what each type means and which one you should choose. While only a qualified tax professional can advise you on what the best setup for your business would be, here is some helpful information to help you understand the different options.  

Sole Proprietors: Let’s start with sole proprietors. These are unincorporated or “independent” businesses. To start this type of business, you don’t have to fill out any fancy paperwork. You simply report your income and expenses using Form 1040 Schedule C, and you’re all set!

Non-Profit Organizations: These entities are unique in that they are not formed to make money but, instead, to a aid a charitable or civic purpose of some sort. These types of businesses are exempt from taxation, though they do have to report their activities and other information to maintain their status.

C-Corporations: C-corporations are incorporated businesses with shareholders who enjoy limited liability protection. These organizations do make money and are subject to taxation.

Trusts: Trusts are created, more often than not, when someone passes away and his investments and business activities are passed on and continued.

S-Corporations: These corporations have no more than 100 shareholders with limited liability protection and, like c-corporations, they are subject to taxation, and they operate for profit.

Partnerships: Finally, partnerships are unincorporated businesses that function separately from their shareholders. They have at least one general partner and at least one other partner. The general partner has unlimited liability.

So, there you have it- the six different organization options. Of course, the type of business you are planning on opening will dictate which options are actually available to you, but you can find out what your choices are and get advice on setting up your business accordingly by visiting with a financial adviser before you get your business up and running!