Types of Small Businesses
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If you are thinking about starting a business, you should be familiar with the many different types of businesses. Here are a few of the most common and popular:
Sole Proprietor
Sole proprietors are the easiest to set up, because there is no special paperwork to complete or anything you need to register. If you are looking to start a very small business, a sole proprietorship is a great way to earn extra income without the headaches of starting a legal entity. However, you won’t have limited liability and you can be personally sued.
Partnership
A partnership is when two sole proprietors work together on the same business. This is not the best scenario for starting a business; you are liable for your partner’s actions and vice versa. If you are planning on starting a partnership make sure it is only for a limited amount of time and then switch over to a corporation or LLC.
LLC.
Limited Liability Company is a mix of both a partnership and a corporation. You get both the advantage of liability of protection as a corporation and the ease of pass through income that a partnership affords you.
Corporation
Usually the most common type of entity for larger businesses; a corporation is a separate legal entity controlled by stocks or shares. While it isn’t too difficult to set up, you have to consider the tax implications, as well as the formal documents that must be filed each year.
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