This is the simplest form of business when there is one owner. Legally, a sole proprietorship has no separate existence from its owner. Any income or losses are taxed on the owner’s personal income tax return. If the business is sued, the owner is personally liable.
A form of business when there are two or more owners sharing the management and profits of a business. There are two common types of partnerships: general and limited.
- In a general partnership, there must be two or more general partners, each having an active role in the business. The partners are also liable for the firm’s commitments and debt, and that of the actions of the other general partners. If one of the general partners does something wrong, all general partners are legally and financially responsible.
- In a limited partnership, there must be at least one general partner and one limited partner. A limited partner has made an investment in the business, but does not have the right to make decisions regarding the operation of the business, and would only be liable for the firm’s debts up to the amount of money that individual invested in the business.
The most common form of corporation where a business is considered a separate entity from its owners. With a C Corp, income is taxed once at the corporate level and then again when distributed to the owners. However, if a corporation is sued, the owners (shareholders) are liable only up to their investment amount in the business.
A sole proprietorship and partnership are similar in that the owner(s) of the business are personally liable for the activities that happen within the business. They are easy to set up, but do not provide the liability protection that you would get from setting up a corporate entity.
There are other types of corporations; we will talk about the differences between them in our next blog. In the meantime, if you want to know more about these differences and which is best for you and your business, our Attorneys at The Greenberg Law Firm are ready, willing, and able to review your current ownership documents or make sure the ownership of a new property is set up correctly. Contact us at 630-416-4747.
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