Business Structures in the US

Introduction

In the United States, there are several business structures available to companies and people looking to start their own businesses. The most common business structure is a sole proprietorship, but other options include partnerships, limited liability companies (LLCs), S corporations and C corporations. Each structure has its advantages and disadvantages that should be considered before making a decision on which type of company structure best suits your needs.

Sole Proprietorship

A sole proprietorship is a business structure in which the owner is personally liable for all business debts. The owner is known as a sole proprietor and has unlimited personal liability. This means that if your business is unable to pay off its debts, all of your personal assets can be used by creditors to satisfy those debts. In addition, you're responsible for filing taxes on all income earned by your business as well as paying any other fees associated with running your company (such as sales tax).

Partnership

A partnership is a relationship between two or more persons who join to carry on a business, with the expectation of economic benefit. In most cases, all partners are personally liable for the debts of the partnership. A partnership must have at least one partner and may have any number of partners (but not more than 20). A partner does not need to contribute any money to the firm; instead, he or she contributes labor and expertise that is valuable to carrying out the business. The other partners make financial contributions in proportion to their ownership interests in the firm’s profits; each owner has an equal share unless otherwise agreed by all parties involved.

Limited Liability Company (LLC)

LLCs are hybrid entities that offer the limited liability of corporations without the double taxation of S corporations. To be an LLC, you must file a document with your state government, called Articles of Organization or a Certificate of Formation. It costs around $100 to file this piece of paper, which typically takes less than five minutes to complete online. An LLC can be structured as either a sole proprietorship (no one owns more than 50% interest), partnership (more than one owner), corporation (no owners), or other business structure that fits your needs.

S Corporation

An S corporation is a legal entity that's taxed like a partnership or sole proprietorship. A corporation is formed when you file articles of incorporation with your state government, and it often starts as a C corporation. The IRS allows you to convert your C corporation to an S corporation by filing form 2553 with the IRS, but if you're converting from another business structure (such as a partnership), you may not have to fill out this form at all. In most cases, the conversion process involves changing ownership and transferring assets; there are no tax consequences for converting from one type of business structure to another.

C Corporation

A C corporation is a business that is taxed separately from its owners. C corporations are the most common type of business in the U.S., accounting for more than 60 percent of businesses in total, and they're also among the most profitable. A C corporation's earnings are taxed as corporate income under Subchapter C of the Internal Revenue Code. This means that any profits left over after paying taxes go back to shareholders as dividends (the dividend tax rate varies depending on how many years you've owned your stock). Owners of a C-corporation aren't personally liable for company debts or legal issues (unless they sign contracts personally), so if a court case goes against your company, it's not on you—meaning there are fewer risks involved with starting one up than other types of firms!

Takeaway

This guide walks you around the different types pf business structures in the US so you could choose the business structure that best suits your needs. You can also change your company's structure at any time, depending on what's happening in the business and how it changes.

Conclusion

There are many different types of business structures to choose from, and each one has its own pros and cons. While some may be better suited for your specific industry or needs than others, it's important to understand what each structure offers so you can make an informed decision about which type of company is right for you.