Types of Business Structures

In 2019, there were around 3.5 million business startups. Even though most of them failed during their first few years, the hope their owners have been handed is to set up their businesses on solid ground. Wish you were one of them.

If you want to make your dream a reality, you should start by knowing the business structures. We don’t mean understanding the different types of restaurants you can choose to open. But instead, the various corporate forms that you can set up yours under.

Keep reading below to learn everything you need about business legal structures.

Sole Proprietorships

Businesses with this structure are owned and operated by one person. They are responsible for all aspects of the business, including the finances. The sole proprietor has the sole authority to make decisions for the company.

The sole proprietors are also responsible for all debts and damages incurred by the business. They may find it challenging to raise capital since they are the only source of funding for the business.

Sole proprietorships are one of the most common types of business structures. They have many advantages, including simplicity, flexibility, and ease of formation. However, sole proprietorships has unlimited liability and the lack of continuity.

Partnerships

In a partnership, two or more people come together to form a business, contributing money, property, labor, or skill. Partnerships can be developed for various business purposes, from selling goods or services to managing a farm. While partnerships can be created for almost any business purpose, there are some common types of partnerships.

The most common type of partnership is the general partnership. In this type, all partners share equal management and financial responsibility for the business. Another common type of partnership is the limited partnership, where one or more partners have limited liability for the debts and obligations of the business.

Corporations

A corporation is a business organizational structure that shareholders own. The corporation is responsible for the debts and liabilities of the business. The shareholders elect a board of directors who oversee the corporation’s management.

The corporation is a legal entity that is separate from its owners. The corporation can sue and be sued, and it can enter into contracts.

The shareholders of a corporation are not liable for the debts of the corporation. There is more company incorporation info found here if you want to learn more.

Cooperative Associations

A cooperative association is a business organization owned and operated by a group of individuals for mutual benefit. Cooperatives are formed to provide themselves with goods, services, or financial assistance that they would otherwise be unable to obtain independently.

Unlike other business structure types, cooperative associations are not motivated by profit. They are inspired by the satisfaction of their members’ needs.

Common Business Structures

Sole proprietorships, partnerships, cooperative groups, and corporations are the four most prevalent business structures. Which structure is best for you will depend on the type of business you run. Each sort of business has advantages and disadvantages of its own, so you’ll find what’s perfect for you.

Are you looking for further advice to aid you in running your business? For more, keep scrolling through our blog!