Types of Business

Majority of the states in U.S. accredit broad assortment of business associations. Additionally, the state law establishes various types of organizations. Some states recognize wide variety of business organizations. For instance, the Limited Liability Company or LLC is a popular form of organization. The LLC is a state designation. However, the federal government taxes LLC as an affiliate. 

                               

The form:

Fresh entrepreneurs also have to think the ways in which they operate their business. Majority of people set up business either in the form of a limited company, in a partnership or just as a sole trader.

 

However, each of the above mentioned forms have their own cons and pros. For individuals, who can easily transact without excessive expenditure on equipment and overheads, sole trader is the best option. Limited company is best for those people, who plan a high-risk venture requiring a lot of capital.

 

Below mentioned are some other ways to begin a business.

 

• Co-operative/employee-owned: Equally owned by everyone, from the office junior to the manager with profit sharing and decisions worked out democratically.
• Community owned:  Owned by a group living in the same area or having similar interests.
• Unlimited company: Although this option provides a degree of financial protection against professional negligence claims, it invites complex financial and tax considerations.

 

Other Miscellaneous Types:

 

Apart from the above mentioned, below are the other common forms of commerce:

 

1. Corporation
2. Sole Proprietor
3. S-Corporation
4. Non-Profit Organization
5. Trust
6. Partnership

 

Sole proprietors are also known as independent freelancers, consultants or contractors. No forms are required to start such business. It is the easiest form of business to dissolve and set up.

 

Corporations come under incorporated business category. Here, each form of business except the sole proprietor is a separate entity. Very often, it provides a measure of financial and legal protection for the shareholders. Corporations have to include at least a single shareholder.

 

Similar to corporations, even partnerships come under the incorporated businesses. However, unlike corporations, partnerships need to have at least a single general partner assuming unlimited business liability, with two shareholders. They distribute all the losses and profits to their shareholders. 

 

The features of S-corporations are similar to that of partnership. Usually, an S-corporation possesses a single shareholder and not in excess of 100 shareholders. In case, shareholders provide services to business, the S-corp. has to pay a reasonable salary to the shareholder. The salary is a segregated payment from the distribution of losses or profits.

 

Usually, trusts are established upon an individuals' death. They are designed to offer continuity of the business activities and investments of the deceased individual.