What are the three types of business entities, and how do they differ?
September 2, 2010 · 2
Question by shawnta e: What are the three types of business entities, and how do they differ?
What are the three types of business entities, and how do they differ?
Best answer:
Answer by Kenneth D
Sole proprietorship-still the most favourite business in the USA because it is the easiest to start. Requires no paperwork. If you sell something for a profit, you are a sole proprietor.
Partnership-an association of two or more individuals engaged in business for profit. Requires tiny or no paperwork, simple to start.
Corporation-a fictitious entity created by statute. You must meet the formal stipulations of the statutes to remember for the benefits. This usually includes initial filings, board meetings, shareholder meetings, annual or bi annual reports and filings.
What do you think? Answer below!
Sole proprietorship
not distinction between owner and company all income is considered taxable
Partnership
2 or more people share expenses and tax
Limited partnership
a partner may be limited to his amount of investment in the co
“C” Corporation
Limited liability of owners
“S” Corporation
same as “C” but allows owners to claim their share of revenue on income (higher set up fees than a “C” corp
Limited Liability Company
Hybrid of a corp and a partnership same liability as a corp but same management structure as a partnership
Hello,
In response to your question . . .
1. Proprietorship
2. Partnership
3. Corporation
Look at it from a tax and liability standpoint and this is why people need to consult with an attorney and CPA before going into business.
Proprietorship, you are taxed what your business makes and you are taxed personally. However, if working out of your home there are some other tax advantages to consider. You can be easily sued which means someone can go after your personal property–home, care, savings, etc.
Corporation. Setting up the right corporation is always the best way to go, simplly for the tax and liability advantage. Depending on the type of Corporation, you could be only taxed once instead of twice.
While a Corporation can be sued, your personal assets will be sate.
Partnership, a bit risky–simply because you will incur any damage, debt, expense, etc. that can or will come to light, if your partner becomes liable. It also requires a detailed written agreement of each others duties and responsibilities and what if statement. For instance, if one decides to opt out and want to be brought out. Also, if or when a partner is unable to work or dies, does the spouse or family get anything. Your business must be protected. Strange things have been know to happen when people die. Of course there will be much to think about when dealing with a partnership. That’s why it can be very risky.