Types Of Companies, Sole Proprietorship, Limited And Corporation

A sole proprietorship business requires a single person to run and operate it, and it is easy to start since it is not a legal entity. A partnership business requires two or more people in order to start a business for profit purposes the business also is not a legal entity. Both partnership and sole proprietor have a disadvantage of unlimited liabilities where they can lose their personal assets to cater for liabilities themselves. Partnership business is not stable since any change of from membership can dissolve it. There are partnerships and limited partnerships. A limited partnership business can be created by filing with the state that can have at least one limited and general partner. Usually a limited partner is not entitled to liabilities or debts accrued.

A corporation business owes its formation to the statutes in states where it is applicable. One of the advantages of a corporation business is that it allows shareholders limited liability corporations to have legal status, and their assets are not at risk of being issued to cover for liabilities. This form of business is potential permanent existence but their management changes with time. The formation of a corporation may be seen as a disadvantage as it requires filling complicated documents with the state and needs registration fee which might be costly. Double taxation done in corporations is a disadvantage as it is taxed on its earnings plus the share holders are charged when receiving dividends. Subchapter S corporation is the only corporation that prevents double taxation since it has flow through taxation.

An (LLC) limited liability company is a type of business that its formation is through application tothe state, and it tries to combine the advantages of partnership and corporation. LLC has filling and formation is done under the statute in addition, it has low filling cost, flow through taxation as the members get taxed on their earnings, and the business is not taxed. Corporation and LLC these have limited liability where the business caters for the liabilities brought forward in the business. However, some members may take advantage and treat this advantage as a shield to hide which may be a disadvantage to other members. When deciding to start a business, an LLC is the best choice of business to deal with since it combines the advantages of partnership and corporation businesses. Therefore, it is better than the partnership and corporations as well as the sole proprietorship.