After a proper taught, you have decided to start a business but you do not want to get into trouble, then the first thing to do is get your business legally covered by doing the proper registration. Your business can fall into any of the following; sole proprietorship, a partnership, a limited liability company (LLC), or corporation. I will be explaining each of the following, leaving you with the option to choose which fits your business.
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The word 'Sole proprietorship' indicates that the business is owned by one man. The complete responsibility and risk of the entire business falls on the owner of the business. Registration is very easy, All that is needed is a business name. Getting this is really easy as a business license can be gotten from your city or county. This gives you an avenue to have a business account with a bank as you are legally registered as a business. This is cheap and very easy to get but the owner bears the risk of the entire business and it is the responsibility of the owner to run it as a one man.
In partnership, it involves two or more people coming together to achieve a particular business purpose. This is like a bond where there a con-censors before a decision can be made. in general partnership, both partners are responsible for the growth and debt of the business. A debt caused by either partner can get the whole partnership into debt and must be resolved by everyone involved in the partnership. In general partnership, all partners are equal and have equal right.
Limited partnership is another type of partnership in which there is only one person running the business. This person is referred to as the general partner. The limited partners are not in the picture, there are passive investors and do not get involved in the daily operation of the business. They are partners because they put in their finance and leave the general partner with the responsibility of running the business. Also, Income and losses are attributed proportionally to each
partner according to their financial contribution and accounted for on their individual tax returns, so the business do not pay income taxes.
An incorporation is completely different from sole proprietorship and partnership. Unlike sole proprietorship and partnership where the owners are responsible for risks, Corporations legally shield the personal assets of thee members from business debts incurred during business.
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Corporation are of several type but the S and C corporation are the common ones. In the C corporation taxes are implemented twice; after profit is realized and when profit is passed to shareholders. C corporations are large corporations that are publicly traded. They can easily sell stocks in stock exchange markets to shareholders. While for S corporation, the corporation is only taxed once and it is taxed on shareholders profit. S corporations offer limited personal liability and can only accommodate 75 shareholders with no preferred stocks.
Limited Liability Company (LLC)
Limited Liability is a combination of the advantages of corporations, sole proprietorship, and partnership. it has become a saving grace for startups and small businesses to experience the good of all forms of business.
You can visit a legal practitioner for more about business form and how to go about getting your business registered.