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NKWS Guide To Starting a Business  -- Legal -- Business Structure

 

Determine what kind of Business Structure is the best for your type of business

 

Traditionally, entrepreneurs have used the three most common forms of business:

  1. Sole Proprietorship
  2. Partnership
  3. Corporation

In the last few years, two other forms of business have been added to the above list: Limited Liability Company and the Limited Liability Partnership

 

 

Type Advantages Disadvantages
Sole Proprietorship
  • Easy and least expensive to organize
  • The owner has 100% control over the business and its operation.
  • Decision making power rests on the owner.
  • All the profits go to the owner of the business.
  • Unlimited liability (owner is responsible for all debts against the business).
  • Sole Proprietors may have to invest personal funds to keep the business going.
    • Partnership
    • Easy to organize.
    • Easier to raise funding (from partners/owners)
    • Profits are shared by the owners.
    • Although it's easy to organize, partnerships require an agreement from all parties involving detailing how profits will be shared, how decisions will be made, how disputes will be solved, how much money each partner will invest, etc.
    • Partners are jointly liable for each other's actions in the business.
    Corporation
    • Life of the business is unlimited.
    • The business and the owners are considered separate entities.
    • Easier to find funding for the business.
    • The process of incorporating the business takes time and a lot of money
    • Taxation is higher for corporations.

     

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