Small Business Administration – Types of Corporations and LLCs
The word business refers to any entity or person engaged in commercial, civil, or professional activity for profit. Companies may be for-profit enterprises or non-for-profit organizations that work to meet a social cause or further a religious purpose. Some types of businesses are sole proprietorships, partnerships, franchises, limited liability companies (LLCs), and partnership partnerships.
All types of business are said to be a partnership when one or more partners have an interest or ownership interest in the venture. Partnerships may be personal or joint, and may also be directed to one common purpose or many. Common purposes for partnerships include increasing the value of the partnership through acquisitions, contributions, and investments, reducing expenses by sharing operational responsibilities, or using the assets and property of the partnership for the benefit of all partners. Examples of common business ventures include the purchase of real estate, establishing a manufacturing facility, or opening a trade show.
Limited liability companies or LLCs are businesses that are considered self-operating and control their own affairs. Unlike partnerships, limited liability companies do not share managerial duties. An LLC owns its own assets and liabilities and is able to grant its owners limited personal liability. In order to open an LLC, a person needs to file a form with the state. Forming an LLC requires the payment of state taxes and paying business licensing fees.
Long term businesses are those lasting at least one year. These businesses may be purchased and later bought back by the original investors. Most long-term businesses are traded on the stock market, with a high level of complexity. There are various types of investments available in this sector, including commodity markets, foreign currency exchanges, and financial markets. Business owners will often consult with investment advisers in order to fine-tune business plans and determine appropriate growth strategies.
The other structure that many businesses choose is a corporation. A corporation is formally established as a separate legal entity from its owners. Like a sole proprietorship, a corporation may have one or many owners. However, unlike sole proprietorships, corporations do not need to pay income tax until they make money.
Finally, there are partnerships. A partnership is formed between two or more people who are related to one another. Partnerships are similar to corporate divisions, with one partner controlling the other’s business. Partnerships have many revenue streams, such as through intellectual property rights and by sharing profits. Many business owners use a small business administration to help them devise comprehensive revenue streams from their partnerships.