Each and every business in the market has its own unique needs, requirements, objectives, and goals. It is precisely this distinction that helps them stand out from the many competitors and establish their own place in the world. Jeffrey Hammel of OakBend Medical Center believes that there is no one-size-fits-all when it comes to business structures, as each company will have different preferences, opportunities, and constraints.
Choosing the Right Business Structure – Explained By Jeffrey Hammel
According to Jeffrey Hammel, the first and most obvious reason is that the legal structure of your business will have an impact on many aspects of your company, from the way it is managed to the amount of taxes you pay. It is therefore important to choose a structure that is aligned with your business goals and objectives.
Another important consideration is that each business structure has its own advantages and disadvantages, so you will need to weigh up what is most important to you and your company. It is also worth noting that you can always change your business structure in the future if your needs or objectives change.
What are the Different Types of Business Structures?
There are four main types of business structures in the United States: sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each one has its own distinct features and benefits, as well as disadvantages that you will need to consider.
Sole Proprietorship
A sole proprietorship is the simplest and most common type of business structure. This structure refers to a business that is owned and operated by a single individual. The owner has full control over all aspects of the business, from decision-making to profits.
One of the main advantages of a sole proprietorship is that it is relatively easy and inexpensive to set up. There are also few legal formalities involved in running the business. However, the owner is personally liable for all debts and obligations incurred by the business.
Partnership
A partnership is similar to a sole proprietorship in that it is owned and operated by two or more individuals. The main difference is that partners share decision-making power, as well as profits and losses.
There are two types of partnerships: general partnerships and limited partnerships. In a general partnership, all partners have equal rights and responsibilities. Limited partnerships have both general partners (who manage the business) and limited partners (who invest money but don’t have any management role).
Like sole proprietorships, partnerships are relatively easy and inexpensive to set up. However, partners are personally liable for all debts and obligations of the business.
Limited Liability Company (LLC)
A limited liability company (LLC) is a business structure that offers the limited liability of a corporation with the tax benefits of a partnership. An LLC is owned by one or more individuals who are known as members.
The main advantage of an LLC is that members are not personally liable for the debts and obligations of the business. This means that their personal assets are protected in the event that the business fails. LLCs also have less stringent rules and regulations than corporations.
However, one of the disadvantages of an LLC is that members may be subject to self-employment taxes. In addition, LLCs can be more expensive and time-consuming to set up than sole proprietorships or partnerships.
Corporation
A corporation is a legal entity that is separate from its owners, known as shareholders. Corporations are owned by shareholders who have limited liability for the debts and obligations of the business.
The main advantage of a corporation is that shareholders are not personally liable for the debts and obligations of the business. This offers them protection in the event that the business fails. Another advantage is that corporations have a greater ability to raise capital than other business structures.
However, corporations are subject to more stringent rules and regulations than other business structures. They can also be more expensive and time-consuming to set up.
Bottom line
Jeffrey Hammel points out that since each business structure has its own distinct features and benefits, as well as disadvantages, owners must be fully aware of the types of structures before finalizing their decision to ensure long-term success and stability.