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:
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Sole proprietor
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Non-profit organization
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C-Corporation
l
Trust
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S-Corporation
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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!