How to design a business structure

A business structure refers to the legal relationship between its owners. These include corporations (C), partnerships (P) and sole proprietorships (S). They differ in terms of liability protection, tax benefits and ownership rights. Let’s see below how to design a business structure.

Corporate Structure

In this type of corporate structure, the company is owned by a parent corporation (often referred to as a holding or owning company) that provides administrative services for it. In return, it receives up to 49% of the shares from the subsidiary. The parent can also be an active partner, which means that there are mutual investments in the business. There are many advantages to forming a corporate structure compared with other types of structures. One advantage is that you will have limited responsibility and liability for the actions undertaken by your business. Another advantage is that your employees will receive an employee retirement plan and health insurance.

Partnership Structure

A partnership has two partners: the general partner and the limited partner. Most people think of a partnership when they hear about real estate investing, but it’s just another form of business entity. Partners are jointly and severally liable for all debts unless you take out personal bankruptcy protection.

Sole Proprietorship Structure

A sole proprietorship is usually the simplest type of business organization. It requires no incorporation papers and no federal income taxes because a person owns it alone and does not employ others. Sole proprietors do file IRS Form 1040 at the end of each year; however, they pay both alternative minimum tax and self-employment tax on top of their ordinary income taxes. Also, if they want to keep more of their earnings over 18 years old, then they must take the required minimum distributions.

Limited Liability Company (LLC)

An LLC offers similar benefits as a C Corporation, plus it allows members who don’t want to assume significant individual liabilities to remain, passive investors, while still enjoying some of the tax conveniences provided by being part of a business. In addition, LLC members aren’t personally responsible for anything related to the operation of the firm visit

Limited Liability Partnership (LPL)

An LLP is somewhat like a C Corporation in that it lets members enjoy the benefits of having a separate legal identity with limited liability while allowing them to reap the benefits of operating through an incorporated business. An LLP is often used by entrepreneurs who need expert accounting, bookkeeping, financial management, and tax compliance services.

Public Benefit Corporations (PBC)

As defined in Section 1360 through 1379 of the California Nonprofit Corporations Code, PBCs are businesses that share profits with their local communities. PBC status gives companies additional powers on behalf of shareholders, including taxing jurisdictions. Shareholders may specify how profits should be shared, such as donating to charity or reinvesting in the community.

Unincorporated Association (UA)

This is also known as a “membership association,” where persons associate together in a group, without coming under the umbrella of any type of government laws regulating corporations. For instance, such groups might include hiking clubs or gardening societies. Although they are considered associations in most states, UAs are neither corporations nor partnerships.

In conclusion, choosing the appropriate business structure depends upon your particular needs and goals. Some businesses require limited liability protections, whereas others offer beneficial tax incentives.