Sole Proprietorship
The Sole Proprietorship is the most popular type of ownership. You are, in essence, the company. Essential elements of the Sole Proprietorship:
* State filing not required.
* Dissolved if the entity ceases to operate or upon the death of the sole owner
* The sole proprietor has unlimited liability
* Very only a few legal obligations
The sole proprietor is in complete control over management and operations.
* Not a tax-exempt entity. The sole proprietor is responsible for all taxes.
* Pass-through income or loss
There isn’t double taxation.
The creation of the website is entirely free to the process of
* Raising capital is usually tricky unless an individual invests money
* There isn’t any transferability of interest.
General Partnership
The General Partnership is formed through the agreement between two or more partners. There is no state filing requirement. Some of the critical elements of General Partnerships General Partnership include:
* Dissolves upon death or the withdrawal of one of the partners unless security measures are included in an agreement for partnership
* Partners are liable in perpetuity
There are relatively very few legal rules.
In most cases, both partners have the same voice unless the arrangement is different.
* Not a tax-exempt entity. Every partner pays tax on their share of the income and can deduct losses from any other income sources
* Passthrough income/loss
* There isn’t double taxation.
The cost associated with the creation of this program. Contributions can be received from partners to raise capital, and additional partners may be added.
* There isn’t any transferability of interest.
Limited Partnership (LP)
Limited Partnership Limited Partnership is formed through the agreement of two or more people; however, state filing is mandatory. The essential features of the Limited Partnership comprise:
* Permanent throughout the existence of the entity.
* At least one partner is unlimited liability
* A few formal requirements but not as formal as corporations.
The Limited Partners are exempt from
* Files tax returns as a separate entity and must meet certain conditions to not be taxed as the corporation.
* Pass-through income or loss when the conditions are met
* There isn’t double taxation.
• A filing fee is required.
* Contributions can be requested by partners to raise capital, and additional partners may be added
* Subject to approval by other general and limited partners, interest can be transferred
Limited Liability Partnership (LLP)
A Limited Liability Partnership requires state filing. It is a requirement in California the usage of LLP is restricted to lawyers and accountants. Some of the key features of the Limited Liability Partnership include:
* The length of time of existence is based on the conditions that are imposed by the state’s creation
* Partners aren’t typically held accountable for the obligations of the LLP
* Delaware, Georgia, Pennsylvania, Texas, and Virginia require an LLP to be insured as well as an account for escrow in order to pay for any liabilities
All partners are entitled to direct the management of the company.
* Files tax returns as an individual entity and must meet specific requirements to not be taxed as a corporation.
* Pass-through income/loss when the requirements are met
* There isn’t double taxation.
A state filing fee is required.
Contributions are accepted by partners to raise capital, and additional partners may be added.
Transferability is possible, but it depends on the operating agreement limitations.
C Corporation
C Corporations are a form of corporate governance. C Corporation requires state filing. The essential features of the C Corporation include:
* The term “perpetual” means permanency
The majority of shareholders are not accountable for the obligations of the company.
* Annual Board of Directors meetings, as well as annual reports, are all operational requirements
* Directed by directors who are chosen by shareholders.
* Taxed at the company level. If dividends are paid out to shareholders, dividends are taxed at an individual level.
* There is no way to pass between loss and income
Double taxation occurs if dividends are paid to shareholders in dividends.
• A filing fee is required.
* Stock shares are traded to raise capital
Stock shares can be transferable.
S Corporation
An S Corporation requires state filing. The most important features associated with An S Corporation include:
* The term “perpetual” means indefinite
Shareholders are generally not responsible for the obligations of the corporation.
* Annual Board of Directors meetings, as well as annual reports, are all operational requirements
Directors are in charge of the company. They are chosen by shareholders.
There is no tax at the level of the entity. Profit and loss are passed to shareholders.
* Passthrough income or loss
* Double taxation in the event of income paid to shareholders in dividends
• A filing fee is required.
Stock shares are traded to raise capital.
* The transferability of interest is permitted while observing IRS rules on who is allowed to have shares
Limited Liability Company (LLC)
The formation of a Limited Liability Company requires state filing. Some of the critical features of an LLC include:
* The duration of existence is contingent upon the conditions set by the state of creation.
The members aren’t typically held accountable for the obligations of the LLC.
* A few formal requirements but not as formal as corporations.
* Members sign an operating agreement that defines the terms of management
If the structure is correctly designed, the entity is structured correctly, and there is no tax at the level of the entity. The loss of income is passed on to the members.
* Pass-through income/loss
* There isn’t double taxation.
The state-file fee is required.
There is a possibility to offer interest, but under operating agreement limitations.
* The possibility of transferring interest is there; however, it is contingent on the terms of an operating agreement.
