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  • Sole Proprietorship vs Partnership vs LLC vs Corporation

    updated 1 year, 5 months ago 0 Member · 1 Post
  • David

    Member
    November 3, 2019 at 4:02 pm

    How Much Do You Trust the Other Owners? On one end of the spectrum you have a sole-proprietor and a general partner, who are personally responsible for all business debts and obligations. This means that in a general partnership, one partner’s error in judgement has the potential to cost the others everything they own. An LLC or LLP would fall somewhere on the middle, they provide a little extra liability protection. Owners of corporation usually have the most protection from being personally liable for actions of their business. Corporations are separate legal entities, so they can be sued on their own, just like people can. This helps limits owners’s personal exposure to lawsuits. Which is why with either an S-corp or a C-corp, trust isn’t as big of a factor. How Do You Feel About Sharing Control? As a general rule, ownership equals control. If you own 100% of a business, you have absolute control. In a general partnership, owners share control of the business; major decisions must be made unanimously. In an LLP or LLC, owners are only required to meet a state-specified majority voting percentage to move forward with major business decisions. A corporation spreads control between anyone with voting shares in the company, meaning owners of a C corporation have to be willing to share control with hundreds, or even thousands of shareholders that are holding their stock, most of whom they don’t know. S corporations don’t have it quite that bad since they’re limited to 100 shareholders. How Much Money Will the Company Need? Sole-proprietorships, partnerships, and LLCs are limited to the money their owners have, plus whatever the bank will loan them. Corporations have more access to capital than other forms of business, primarily through selling their stock. C-corps have two significant advantages over S-corps. S-corps are limited to 100 domestic shareholders, all of whom must be issued the same class of stock. Since C-corps aren’t bound by those limitations, they are able to benefit from the largest pool of potential investors. How Much of Your Time Can You Devote to Administrative Aspects of the Business? Sole proprietorships are the simplest and cheapest option to get off the ground, since they don’t require any paperwork. On the other end of the spectrum, corporations are subject to a dizzying array of rules and regulatory oversight. Making the decision to operate as an S corp or C corp means at least one owner must spend a significant amount of time monitoring the company’s compliance with applicable legal and regulatory requirements. Full article Choosing the Best Structure for Your Business — Four Questions to Ask Yourself – by hq overview turnsoutimasian – –

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