There exist three basic types of business structures. One should know the basic forms before getting into a business situation to avoid possible problems. The three basic types of business structures are as follows:
i) Sole Proprietorship:
This type of business is owned by one someone who is called a proprietor. The proprietor manages the business. Some disadvantages are as follows: the proprietor assumes all risks of the business and personal assets can be taken by creditors. One major advantage of the sole proprietorship is the owner makes all the decisions.
a) The normal partnership business structure is owned by more than one person.
One or more partners may administrate the business. As to disadvantages, like the sole proprietorship, partners assume the risks for the business and their assets may be taken by creditors. Additionally, partners may disagree about the best way to run the business, which could consequent in a conflict. An advantage of a partnership is the owners share risks and decision making.
b) There is other form of business structure in the partnership arena, which is
called the small Liability Partnership (Llp). This form is distinct from the normal partnership structure. Liability is small to the assets of the partnership in this business form.
a) The normal corporation is owned by stockholders (or shareholders).
Usually a corporation may have many owners and they ordinarily employ pro managers. The owner’s risk is ordinarily small to their personal investments and they often have very small affect on the business decisions. However, the corporation veil may be pierce if the corporation is negligent in its operation.
b) The next corporate form is the small Liability Corporation (Llc). This
structure is distinct for the normal corporate form. As the name implies, liability is small in this form as in relation to the normal corporate structure.
c) Finally, there exists the non-profit corporation. These types of corporations
are ordinarily 501(c) such as a church, community based organizations, a group high school, Ymca, and the like. The tax structures are ordinarily distinct for the behalf making organization as in relation to the non-profit making corporations.
Before any business decision is made it’s best to consult a pro in the area such as an attorney who specializes in the field of business formation. There are also some business consulting firms where help may be obtained. The Small business connection also has a group of individuals available to help known as, service Corps of Retired menagerial (Score), or Counselors to America’s Small Business.
Three Basic Types of firm rights Structures – Advantages and Disadvantages