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Guide: Start a Business Part FiveOne of the first decisions that you’ll have to make as a business owners is how your business should be structured. You need to know the advantages and disadvantages of each of the different forms of business organization to make sure you’re making the right decision for your new business. All businesses must adopt some legal configuration that defines the rights and liabilities of participants in the business’s ownership, control, personal liability, lifespan and financial structure. The form of business determines which income tax return form to file and the company’s and owners legal liabilities. This is a big decision that has long-term implications, so if you’re unsure of which form of business is best for your company, you’ll want to consult a professional. Luckily, there are several business counselors and centers across Missouri offering free assistance in forming a business that are knowledgeable and ready to help. When you’re forming your new business, you will want to take into account the following:
>> Need a little help? Fill out our help form so we can assist you in coming up with a plan that is personalized for your business and life. Bonus: our services are always free. Now let’s dig into the different forms of business organization. Sole proprietorshipThe vast majority of small businesses start out as sole proprietorships. These businesses are owned by one person, usually, the individual who has day-to-day responsibility for running the business. Sole proprietors can be independent contractors, freelancers or home-based businesses. Sole proprietorship advantages
Sole proprietorship disadvantages
Tip: When looking at setting up a sole proprietorship, assess what type of liability you have. If you’re selling advice or services, you may need an errors and omissions insurance policy to cover yourself against claims for negligence. Determine what you have to lose. Do you own a home or savings account? Your personal assets could be at risk in the case of a lawsuit. PartnershipsIn a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out or what steps will be taken to dissolve the partnership when needed Disclaimer: If you’re establishing a partnership, it is extremely important to make sure everything is outlined in case things go sour, especially in the case of starting a business with a loved one or friend. Seek legal advice to create a partnership operating agreement to hash out all business decision possibilities including succession or exit plans. There are several legal services in Missouri ready to assist you every step of the way. Partnership advantages
Partnership disadvantages
CorporationsA corporation is considered by law to be a unique entity, separate from those who own it. A corporation can be taxed, sued and enter into contractual agreements. The corporation has a life of its own and does not dissolve when ownership changes. There are three types of corporations: C-corporation, S-corporation and Limited Liability Company. C-corporationA C-corporation is a corporation that is taxed separately from its owners. It gives the owners limited liability encouraging more risk-taking and potential investment. C-corporation advantages
C-corporation disadvantagesDouble taxation (corporation and shareholder earnings taxed) Can be costly to form More administrative duties - required by law to have annual meetings, notify stockholders of the meeting, must keep minutes of meetings and turn in Pay corporate taxes at a different time than other forms of business S-CorporationAn s corporation also known as subchapter S-corporation offers limited liability to the owners. S-corporations do not pay income taxes rather the earnings and profits are treated as distributions. The shareholders must report their income on their individual income tax returns. S-Corporation advantages
S-Corporation disadvantages
Limited Liability CompanyA limited liability company or LLC is a hybrid business structure that provides the limited legal liability of a corporation and the operational flexibility of a partnership or sole proprietorship. However, the formation is more complex and formal than that of a general partnership. Tip: Forming an LLC requires the business owner to file legal paperwork. You may want to consult an attorney to assist you with the process. Here is a list of service providers in Missouri that provide legal assistance. Limited liability company advantages
Limited liability company disadvantages
Who can help?Many business-building organizations in Missouri offer legal services to help you through these beginning stages of launching your business. Start with this list or pop over to The Resource Navigator to filter this list by your location, industry and more. Remember if you need help, give us a call at 866-870-6500 or send us a message. We can guide you through the next steps you need to take to start your business.
Remember if you need help, give us a call at 866-870-6500 or send us a message. We can guide you through the next steps you need to take to start your business. Which is not one of the three forms of business organization?(b)Creditorship is not a form of business organization. The other choices are incorrect because(a)soleproprietorship, (c) partnership, and (d) corporation are all forms of business organization.
What are the 3 forms of business organization?There are three common types of businesses—sole proprietorship, partnership, and corporation—and each comes with its own set of advantages and disadvantages.
What are business organization forms?There are 4 main types of business organization: sole proprietorship, partnership, corporation, and Limited Liability Company, or LLC.
What are the three main forms of business organization quizlet?The three major forms of business organizations are the sole proprietorship, the partnership, and the corporation. The sole proprietorship is a business owned by one individual. The partnership is a business that is owned by two or more persons with the intent to make a profit.
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