In the present day and age where the world is literally two Corporations and one DBA, (doing business as), it is quite clear that we need to make sure that we are keeping our small businesses viable. A business is defined as any enterprising entity or corporation engaged in commercial, manufacturing, or service activities for other people. Businesses may be either for-profit or non-profitable entities that perform to meet a social objective or further a charitable cause. There are many forms of business that fit into this broad umbrella and some of the most common industries in the United States include retailing, banking, insurance, real estate, communications, entertainment, transportation, publishing, and information technology.
Many businesses are formed on the basis of relationships. Business partnerships are essentially relationships between people or entities who are related to one another. Examples of such relationships may include business transactions with suppliers, stock ownership, joint ventures, management agreements, franchises, and licensing programs. Many partnerships are initiated between organizations with complementary skills and strengths. These relationships provide the opportunity for growth and expansion in many businesses, often resulting in a positive cash flow and new business opportunities.
When you incorporate a company, you generally create a separate legal entity called a corporation. This corporation is considered a partnership for tax purposes, although, you are not considered a partnership for income tax purposes. Your personal assets will remain in your name and you will receive the profits from the business assets. A liability partnership will record its profit on your personal income tax return.
The general nature of a partnership will remain the same no matter what type of corporation you form, although, the partners generally control the voting power and have the same liability as each other. When a partnership is created, the partners share in the profits and losses of the business. Generally, there will be one primary partner and several secondary partners. The business and the partners will continue to operate independently under their own personal identities, but they will report individually their income and gain the status of publicly owned corporations.
One of the most common types of business entities is a sole proprietorship, also known as an LLC or Limited Liability Company (LLC). A sole proprietorship is a unique situation that has two main characteristics: it is a partnership where one main entity owns and controls the other entity, and it is a C-corporation, where the partnership is a separate legal entity from the underlying company. There are many different variations of these types of businesses, but the two main differences are the degree of liability and control possessed by the partners. As with corporations, there are various ways to incorporate a sole proprietorship.
Some of the common types of SOHO businesses are: Sole proprietor, partnership, C-corporation, LLC, and general partnership. A sole proprietor is formed when one person owns all of the shares of equity in the business while still acting as the general manager. When this happens, they can control and/or invest their personal assets, take over the liability of the partners, and own all of the equity in the company. A partnership is formed by more than one person when they are related to each other through a contract or common ownership. In a C-corporation, one corporation holds a majority share of the shares and is called a public corporation.
Many states have what is called a limited company limited liability. This is another variation of a corporation; the difference between a corporation and a limited company is the liability. In a limited company, all of the shareholders are responsible for the company’s debts and the management of the assets. The general practices in a C-corporation is to use corporate funds in the purchase of property and to reduce the personal share of ownership. Many times a corporation will use its retained earnings to finance an acquisition or fund an investment.
There are many businesses that utilize a variety of these business structures. These vary from real estate partnerships to sole proprietorships and incorporateations. Each has its advantages and disadvantages and should be carefully considered when forming your company. There are many businesses out there today that utilize a number of these, so consider your options!