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There are four basic forms of for-profit businesses in the United States, and each of them has advantages and disadvantages. Your decision can have important effects on your ability to separate your own personal assets from business assets, your ability to raise capital, your taxes and the disposition or transfer of the company when it is bought or sold.
Sole Proprietorships The sole proprietor is the default option for one-owner businesses. If you make no other election and you have only one owner, you are automatically a sole proprietor.
The advantage to being a sole proprietor is its simplicity -- it requires no additional filing or record keeping, though the IRS will require you to keep accounting records for tax purposes. The major disadvantage of the sole proprietorship format is personal liability.
You have unlimited liability for all lawsuits against your business. You can lose everything you own, personally, if there is a business or legal dispute and you have a judgment entered against you in a lawsuit. Partnerships Partnerships are joint ventures between two or more owners.
Partnerships can be limited or general. In a general partnership, both partners are wholly responsible for all claims against the business.
In a limited partnership, you will have one or more general partners and the rest are limited partners. The general partner has potentially unlimited personal liability; the limited partners' liability is limited to the amount they contributed to the company.
Limited partners cannot take part in the day-to-day management of the firm, however. If they do, they risk having the protections of being a limited partner revoked.
Corporations Corporations are separate legal persons under the law. They have a legal identity that is separate and distinct from that of their owners, and owners are not generally held financially responsible for claims against the corporation.
Subchapter S corporations are not taxed at the company level; instead, their profits pass through to shareholder returns and are taxed at the shareholder level.
S-corporations also have strict limitations on who may be shareholders. You can have no more than shareholders, and they must be residents or citizens of the U.
C-corporations do not have these restrictions, but they do pay income taxes at the company level, before passing dividends to the investor. This is called "double taxation" and is a disadvantage of C-corporations.
C-corporations may be the best choice, however, for those who plan to expand and who want to have the freedom to raise large amounts of capital by issuing stock.
Limited Liability Companies Limited liability companies are a cross between partnerships and corporations. They do not have any legal status under federal law, but state law allows them to provide their owners with substantial limited liability.
They can also choose how to be treated for the purposes of filing their income tax returns. Specifically, LLC members can choose to have their businesses treated as an S-corporation or as a partnership.
Single member LLCs can choose to be treated as a sole proprietor for income tax purposes.Writing an Effective Business Letter.
E-mail may be the quick and convenient way to relay daily business messages, but the printed business letter is still the .
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Federal contractors are required to maintain an acceptable subcontracting plan if they are a large business (including all affiliates) and the estimated dollar value of the base contract and all option periods exceeds, or is expected to exceed, $, Contractors that meet the above criteria must establish a subcontracting plan with specific dollar and percent goals for subcontracting to.