Do you wish to live the American dream? Are you planning to
start a company in the States? If you answer yes to both these questions then
you must read this short guide to learn all the basics about types of companies
and what type of company you should choose.
Whenever starting a business, it is essential to perform the
maximum research in your specific field and area to be safe. We have explained
some of the most common types of companies in the US. So, when filing for a business you may choose
the business structure which suits best for your interests and needs.
Sole Proprietorship:
A sole proprietorship
is the most simple and common business structure. A sole proprietor may be one
individual or a married couple in business alone. This business structure is
easy to form and operate. Sole proprietors may enjoy some pros like fewer
taxes, fewer legal controls and greater flexibility of management.
Albeit, in this type of business structure; the owner of the business is
personally liable for all debts incurred by the business.
Joint Venture:
A joint venture can be defined as a business entity created
by two or more parties, which share their resources to accomplish a specific
task or business activity. Generally, in
a joint venture, the ownership is shared between the partners/ parties, who are
subject to shared returns and risks, and shared governance. Joint ventures are
expedient in new-market penetration.
Tenants in Common:
Tenancy in common or co-tenants business structure allows
two or more people to occupy the same business while retaining separate
identities in regards to assets or liabilities resulting from business
activities. In this type of business, no
co-tenant has the right to survivorship
unless stated in a will.
General Corporation:
A General Corporation also known as C Corporation is the
most common type of business structure. It is composed of two or more entities;
each partner shares the profits, losses, and the management of the business. It
is typical for medium and large companies due to unlimited stock, easy transfer
of shares and no obligation for the shareholder or directors to be US citizens.
The profits
of this organization are taxed twice;
first at the corporate level and then as dividends to shareholders.
S Corporation:
An S corporation is a type of corporation that meets
required specification of the subchapter S of chapter 1 of the Internal Revenue
Code. So, an S corporation is basically a C corporation. The C Corporation must
apply in a certain time frame after its incorporation to obtain this special
tax status from IRS. Double taxes are avoided by treating shareholders as
partners.
Limited Partnership:
A limited partnership business structure is much like a
general partnership, but instead of minimum two general partners, it must have
at least one general partner and one limited partner. The General Partners of
the company manage the business and share the losses and profits of the company
wholly, while the limited partners are not involved in day-to-day operations
and share in the profits of the company but the liability of losses are limited
to their investment.
Limited Liability Company (LLC):
A limited liability company is a distinct legal entity. This
type of business structure is composed of one or more entities through a
special written agreement that details the organization of the LLC including
management, assignability of interests, and distribution of profits and losses.
Forming an LLC has
some advantages like the personal liability of the members are limited to their
investment and protection of the members’
assets.
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