When starting or operating a business, one of the most important decisions that you will make is what type of business entity you should choose. There are four main types of business entities: the sole proprietorship, a partnership, the limited liability company (LLC) and the corporation. Each type has advantages and disadvantages depending on the circumstances. When choosing a business entity, your ability to anticipate liability, taxes, ownership, management, exit strategies and other factors all play into the decision on which type is best suited for your business. It’s often advisable to contact a business lawyer to ensure the proper consideration and understanding of the pros and cons of each type of entity.
Most small companies in America are sole proprietorships. It is the most basic way in which to conduct business. There are no formalities to follow and all taxes are reported on the owner’s individual income tax.