This is the simplest and the most widely used structure for business. It is the least regulated type of the various business structures. For tax and legal purposes, the business is the owner. The unlimited liability factor is probably the greatest disadvantage. The liabilities of the business are personal to the owner, and the business ceases to exist when the owner dies.
The Limited Partnership
The limited partnership is a hybrid type of business structure. It contains elements of both a traditional partnership and a corporation. The limited partnership form of business structure may be used when some interested parties want to invest in a partnership but want only limited liability and do not wish to exercise any control over the business activities of the partnership.
The limited partnership is subject to much more regulation on the state level than either the sole proprietorship or regular partnership. Each State in the Union has adopted strict regulations according to the Uniform Limited Partnership Act governing the formation and operation of the Limited Partnership.
A limited partnership consists of two types of partners; the general partner; one or more people who actively manage the partnership; and the limited partner; one or more people who invest in the partnership but take no active role in the management of the partnership. The general partners are at personal risk for their conduct of the partnership, whereas the limited partner risks only that which he has invested in the partnership.
A corporation is an artificial entity created by filing Articles of Incorporation with the Secretary of State. This gives the corporation an existence and a legal right to conduct business in the State of incorporation. Corporations are more complex than either a partnership or sole proprietorship and are subject to more regulation by the State.
The internal rules of the corporation, which outline the mechanics of the operation and management, are called the by-laws.
Advantages of Incorporation
Disadvantages of Incorporation
The Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a hybrid business entity designed to combine the advantages of a corporation with the tax advantages of a partnership. Like a corporation, the owners of an LLC are not personally liable for the LLC's debts and obligations. Like a partnership, an LLC can be treated as a pass-through entity for tax purposes. Beginning in 1997, the IRS no longer taxes these entities as corporations.
They permit the LLC to elect whether taxation as a partnership, sole-proprietorship, or corporation best fits the needs of its business and its Members. This may be advantageous for those who cannot meet the IRS requirements for an "S" corporation and desire the pass-through tax treatment.