You have the following options for business structures: sole proprietorship or partnership. A sole proprietorship Is the basic type of business structure. It would consist as you being the owner only to run and operate the business. The advantages of this business structure Is that It Is easy to start-up, the start-up costs are low and the owner receives all profits from the business. Also, the owner can upgrade to a partnership or corporation easily In the future. A disadvantage to this business structure Is the proprietor Is responsible for debts and obligations.
Business earnings for a sole proprietorship is taxed once, thus making filing taxes not complicated. Funding for a sole proprietorship is usually from personal finances and friends and families. This is due to limited financial opportunities from lending institutions and investors. A partnership involves you and at least one other person. There is two types of partnerships: general and limited. In a general partnership owners are equal and split responsibilities accordingly. In a limited partnership the limited partner have a limited role.
The advantage of a general partnership is that the business is easy to start and profits and losses are divided among the partners. A disadvantage is that all partners are liable for debt. Another disadvantage is that all partners are bound to actions or decisions made by one partner. Last, this is not a good structure if the partnership wants large capital. For this type of business structure, each partner is taxed. A limited partnership is ideal for who has a preference of not having an active role in the company.
Advantages include: minimum government regulations, limited partners not held responsible for debt and liabilities, and general partners have complete control. Disadvantages for a limited partnership are: more expensive to create compared to a general partnership, general partners of a limited partnership don’t have any liability protection, and the paperwork is complex. For tax persons, income Is taxed as personal income only. Overall it is Important to keep funding in mind. Funding for each type of business structure can come from one or multiple avenues.