Business Structures
One can conduct business professionally and help the company reach its objectives by using a business structure. Limited Liability Companies, Sole Proprietorships, Partnerships, Corporations, and Cooperatives are some of the various business entities one might select. The particular business module and its objectives will determine the best business structure. I would pick a Limited Liability Company entity if I were beginning a business because it has a variety of practices and practicality I'd like to use in my company. Both corporation and partnership traits can be found in a limited liability company (LLC). As an LLC, a business can run more professionally by using a variety of laws (Haney, 2009). It is, therefore, significant for one to check the legal requirements when it comes to using the Limited Liability company entity.
Nature of an LLC and Liability
The nature of an LLC as stated in its name is the liability of its members which is in most cases limited to an extent of their business investments. Through this statement, it clearly shows that members of an LLC cannot be sued due to the company’s debts that might put their investments at risk. However, there is a rule that might appear different in cases where a member may be deemed liable by the company. A good example would be when a member gets involved in guaranteeing for a loan at a personal capacity.
Taxation Policies
There exist taxation policies when a business uses the LLC entity. However, in most cases, the LLC itself is not taxed in most countries. It is the company’s members who pay those taxes on the profits they get individually. When members get back their profits in the company, they might be eligible for a reduction in the tax bill. However, members in this entity have the authority to choose their business entity classification when it comes to taxation. An LLC entity has the unlimited number of members who have the opportunity to involve themselves in any management requirement of the business. Conducting a general meeting is not a key requirement in an LLC’s operations (Lazonick, 1993). However, the whole business is required to be registered in the state of corporation offices to give it a legal consent for its operations.
Forming a Limited Liability Company
There are various steps used when forming a limited liability company. First, one has to choose a suitable name for the Limited Liability Company. The name of the business must not correspond with any other business name registered. Secondly, one needs to file articles of organization. Then, an operating agreement for the LLC needs to be created. In some cases, one may be required to publish a notice in some states. The other requirement one needs to do is to obtain permits and licenses. Lastly, the owners of the LLC are required to retain their limited liability.
Partnerships
A partnership entity simply stands for an agreement between two people who join hands together to form a business for a profit (Lazonick, 1993). Formation of a partnership entity requires one to have a business name and register it with the state of incorporation to get legal consent for the business operation. This type of entities requires only two people to come together in a business venture for profit. The main advantage with partnerships is that each one gets a share of the profits and they can conduct a variety of businesses. The disadvantage is that each partner has a limited partnership for the business debts. Partnerships businesses are not taxed directly. However, taxation occurs to the owners of the business at personal levels.
Sole Proprietorship
This type of a business structure is run by single individuals for profits. It is regarded to as the simplest form of business organization (Lazonick, 1993). A liability for this type of business structure is entitled to the owner. If the owner of the business happens to die, the business liability is terminated. The main advantage with a sole proprietorship is that it is easy to form and operate, one is required to find a suitable business name for the venture and register it with the state authorities. Sole proprietorship businesses are not taxed directly. However, taxation occurs to the owners of the business at personal levels. In a sole proprietorship business, the transfer of business takes place at the permission of the sole proprietor. One of the disadvantages is that a sole proprietor is deemed liable for all the debts and obligations of their businesses.
Corporation
A corporation business structure operates under state laws and its activities are restricted by its charter (Lazonick, 1993). Running the entity requires one to file articles of incorporation so as to establish a corporation. Its liability lies on its stockholders where some of the employees who are also stockholders may get tax-free privileges. A corporation is double taxed. To form a corporation, one needs to find a suitable name for the entity and register it with the required state authorities under state laws. One of the advantages is that in a corporation, the Board of Management has the obligation to separate their personal assets from the company's ones. Double taxation is the main setback that affects the corporation business entity.
References
Haney, L. (2009). Business organization and combination. BiblioBazaar.
Lazonick, W. (1993). Business organization and the myth of the market economy. Cambridge University Press.
