If you are commencing a business in USA & confused which type of entity to incorporate. Understand the following type of business entities & choose which entity to form:
- Sole Proprietorship- It is a business entity with no separate identity of its owner. Single owner is liable to receive all the profits & taxed as personal income of the owner. This is the easiest & most inexpensive form of entity. Small business units at the initial phase of their business can opt for this entity.
- Partnership-
- General Partnership- This is the most basic type of partnership. Under this partnership, equal ownership & liability is distributed among partners, unless otherwise specified.
- Limited Partnership- A limited partnership has atleast one general partner &atleast one limited partner. They are authorized under laws of the state.
- Joint Venture- They are established for conducting a single enterprise or transaction and usually continue for a short period of time.
- Limited Liability Company (LLC)- It is organized & registered under State laws & will have Certificate of Incorporation, AOA & operating agreement. Members of the LLC are protected against their personal liability. Business looking for structured form of organizationalong with their limited liability usually opt for this type of business entity.
- C Corp- C Corp is also organized & registered under State laws. Certificate of Incorporation is issued by Secretary of State (‘SOS’). It provides ease of formation with minimal cost. Liability of the shareholders is limited. Business looking to raise funds from the investors & looking for scalability of business usually opt for this type of business entity.It is also preferrable for non- resident who are looking to set up a business entity in US.
- S Corp- Owners of S Corp can only be US citizens. Foreign shareholders are not allowed to invested in S Corp.It must be a domestic cooperation.
