If you are in the process of taking
a small business idea and turning it into a reality, you likely
have been debating over what legal form your small business
should take. In this regard, there are a number of different
options available to you. In this article, you will be presented
some basic information about the four most common types of
small business organizational schemes that are used today:
-- Sole Proprietorship
-- Limited Liability Company
-- Corporation
--Partnership
Sole Proprietorship
A sole proprietorship used to be the most common type of
small business entity in many countries around the world.
In simple terms, you merely start up a business and do not
particularly create an special legal entity for the business.
You run the business in your name alone.
There are some benefits to this type of organization (or
lack of organization) because you do not have to file various
documents with governmental authorities of the type you
must utilize if you a organize as a corporation or some
other legal entity.
However, if you have a significant amount of assets, you
may not want to use a sole proprietorship for your small
business. If you do use a sole proprietorship, and end up
getting sued, all of your assets can end up at risk. There
is no protective wall as exists when you use an LLC or corporate
organizational form.
Limited Liability Company
The limited liability company is becoming the most widely
used type of legal entity for a small business. The limited
liability company is easy to organize and does not require
all of the paperwork that is associated with a corporation.
With a limited liability company -- or an LLC, as it is
commonly known as -- you essentially have all of the protections
associated with a corporate form of organization.
For years, the corporate form of organization
was widely used when it came to a small business enterprise.
While it is still in use today, the corporation frequently
is becoming replaced by the limited liability company when
it comes to small business organization.
The corporate form does require a good amount
of paper work -- both when organizing and when running the
entity. However, you are provided with a significant amount
of personal protection should you face some sort of lawsuit
at the level of your small business enterprise.
A partnership can be a fairly easy type of
entity if there is more than one person involved in a small
business venture. (The other types of entities can consist
of only one owner -- even a corporation or a limited liability
company.) In simple terms, a partnership is an agreement between
the owners of a small business enterprise. Each of the partners
owns a share or percentage of the small business enterprise
as set forth in the partnership agreement itself.
