Business Structures Overview

Sole Proprietorship

• Owned and run by one person.
• Simplest form of business to establish.
• Owner receives all profits but is personally liable for all business debts.
• Limited access to capital compared to other business structures.
• Easy to dissolve.

Partnership

• Owned by two or more individuals.
• Shared profits and losses, responsibilities, and liabilities among partners.
• Typically involves a partnership agreement outlining responsibilities, profit sharing, and dispute resolution.
• Can raise more capital than a sole proprietorship.
• Partners are jointly and individually liable for business debts.

Limited Liability Company (LLC)

• Combines the benefits of a partnership or sole proprietorship with limited liability protection of a corporation.
• Owners (members) have limited liability, protecting personal assets from business debts.
• Flexible management structure, allowing members to participate in management directly or indirectly.
• Can choose to be taxed as a partnership or corporation, potentially reducing tax burden.
• More complex setup than sole proprietorship or partnership.

Corporation

• A separate legal entity from its owners.
• Owners (shareholders) enjoy limited liability, protecting personal assets from business debts.
• Easier to raise capital through the sale of stock.
• More complex to establish than other business structures.
• Subject to corporate tax rates, which can be higher than individual income tax rates.
• Often has a board of directors and officers who manage the company.

Cooperative

• Owned and democratically controlled by its members.
• Members share in the profits and responsibilities.
• Often formed to serve the needs of its members, such as providing goods or services.
• Can be more sustainable than other business models as they are community focused.
• Can be difficult to establish and operate; requiring significant dedication and community support.

S Corporation

• A type of corporation that avoids double taxation (found in C-Corporations).
• Profits and losses flow directly to the shareholders and are reported on their personal tax returns.
• Can provide limited liability protection to owners.
• Restrictions in the number of shareholders and types of shareholders are common.
• More complex than other business structures, requiring significant administrative work.

Franchise

• A business model based on licensing an existing business model.
• Owners (franchisees) pay fees and royalties to the franchisor.
• Benefits include establishing a recognized brand and support from a larger organization.
• Can include restrictions and standardization elements.

Non-Profit Organization

• Formed to pursue charitable or social causes.
• Do not distribute profits to owners.
• Often rely on donations or fundraising.
• Must comply with specific regulations to remain a non-profit organization.
• Restricted from engaging in business activities that could jeopardize the charity basis of the organization.