JohnAnDeva

Types of Ownership Structures

There are basically 3 types of business ownership for you to choose from: 1. Sole Proprietorship; 2. Partnership, and; 3. Corporation. 

Sole Proprietorship: This is the type that is easiest to set up.  It is a one-operson business that is not registered with the state like a limited liability company or corporation.  There is not a lot of requirements to file and you create one just by going into business for yourself.  However, the disadvantage of this type ownership is that the sole proprietorship is inseparable from its owner.  Meaning, the owner of the business reports income and losses on his/her personal tax.  The owner is also personally liable for any business-related obligations, including debts and court judgments.

Partnership: Partnership is rather similar to sole proprietorship except that it is owned by two or more people.  As in sole proprietorship, the arrangement of a partnership begins whe you start a business with another person.  The partnership owners also file taxes on their shares of the business income on their personal tax returns.   Each of the partners are also liable for the entire amount of any business debts or claims.

In general, sole proprietorship and partnership can be a good choice in businesses where personal liability is not an issue.   When you will not be borrowing much money or you are unlikely to be sued, then you can go for either a partnership or sole proprietorship.