The type of structure you choose for your business has a bearing on everything from personal liability to how the business is taxed. Always explore possible corporate statuses with a lawyer so your business has the highest levels of protections in place. Below, four common business structures are discussed in more detail.

4 Types of Corporate Structures Explained

1. Sole Proprietorship

A sole proprietorship is a business owned and operated by one person. They are the easiest corporate structures to form with a lawyer, and they come with the potential for a new business owner to establish themselves without a lot of risk. On the downside, sole proprietorships go hand in hand with personal liability, so the business owner is personally responsible for any losses; also, sole proprietorships cannot sell stock and may find it harder to obtain loans.

2. Partnerships

There are two types of partnerships, limited partnerships and limited liability partnerships. With limited partnerships, one partner has unlimited liability, while the other partners have limited liability; the latter typically have limited input and control in the company. Profits go through individual partners' tax returns. Limited liability partnerships offer limited liability to all business owners. An LLP safeguards each individual partner from the debts and actions of other partners in the business.

3. Limited Liability Companies

An LLC limits your personal liability in the business. Your personal assets cannot be targeted for lawsuits or debt repayments associated with the business. LLC owners are self-employed in the eyes of tax law and must pay self-employment taxes.

4. Corporations

There several types of corporations. C corps are legal designations entirely separate from their owners; both the corporation and the shareholders are taxed on profits and can be held legally liable. S corps avoid the double taxation of C corps, meaning all profits and losses of the business go through individual shareholders' tax returns. A nonprofit corporation is a business that conducts charitable work and avoids paying state and federal income taxes in exchange for the benefit they are providing to society.

Understand the benefits and drawbacks of all corporate statuses by discussing your options with a lawyer. Attorney David Schmidt of Woodlawn Law Offices has been serving the St. Charles County, MO, area for more than 25 years. He offers representation in corporate and business, disability, family, personal injury, and estate law cases. Call (636) 240-6667 or visit his website to arrange a consultation with a lawyer.