One of the questions we at Optimus get asked by many new entrepreneurs is, “What is the difference between business structures, and which one is the best for my new business?” Below is some basic information that may assist you in making a decision.
Sole Proprietorship: not required to be a US citizen, owners can report business profit and loss on personal tax returns, not required to hold annual meetings or record meetings minutes.
General Partnership: may have an unlimited number of owners, not required to be a US citizen, owners can report business profit and loss on personal tax returns, permitted to distribute special allocations under certain guidelines, not required to hold annual meetings or record meetings minutes.
Limited Liability Company: owners have limited liability for business debts and obligations, created by a state-level registration that usually protects the company name, business duration can be perpetual, may have an unlimited number of owners, not required to be a US citizen, may be owned by another business rather than individuals, owners can report business profit and loss on personal tax returns, permitted to distribute special allocations under certain guidelines, not required to hold annual meetings or record meetings minutes.
S Corp: owners have limited liability for business debts and obligations, created by a state-level registration that usually protects the company name, business duration can be perpetual, may issue shares of stock to attract investors, owners can report business profit and loss on personal tax returns.
C Corp: owners have limited liability for business debts and obligations, created by a state-level registration that usually protects the company name, business duration can be perpetual, may have an unlimited number of owners, not required to be a US citizen, may be owned by another business rather than individuals, may issue shares of stock to attract investors, owners can split profit and loss with the business for a lower overall tax rate.
As can be seen in the explanations above, many of the different options overlap between business structures. When deciding which business structure best fits your needs, it is necessary to determine which of the options are most important. For example, if you want the option to issue stock and have multiple owners, a C Corp would be the best option. There are a variety of resources online for business owners to use when weighing options regarding business structures as well.
