The structure of a business
A person's capacity to raise capital is impacted by the business structure they select. Additionally, it affects the company in terms of what occurs when the company is sued. Some of the most popular business structures include limited liability companies (LLC), S corporations, and C corporations.
A Limited Liability Company (LLC) is a form of business organization that combines the characteristics of a corporation and a partnership. In terms of commercial flexibility and tax efficiency, an LLC combines the characteristics of a partnership. Additionally, it incorporates the limited liability characteristics of a corporation. In the event of business responsibilities and debts, LLC owners are not personally accountable. Another feature of an LLC is that instead of taxing the business itself, the member's profits is what is taxed (Seaquist, 2012). A C Corporation, on the other hand, is a business structure that is owned by shareholders. Unlike an LLC, a C corporation business is taxed only when the company makes profits and/or when the investors are given dividends. Importantly, the business is treated as a separate entity from the owners. This means that in case of business obligations and debts, the business, and not the owners is held liable (Seaquist, 2012). Despite the formation requirement of an S Corporation being similar to a C corporation, with an S Corporation there is no double taxation as is in the case of a C corporation.
If I were operating my business, I would choose an LLC as the organizational structure of my business. The reason for this is that an LLC business structure is ideal for start-up businesses that require flexibility in the management of the business, do not need to raise a lot of capital and require liability protection. Finally, it is a bit easier to form an LLC.
Reference
Seaquist, G. (2012). Business law for managers [Electronic version]. Retrieved from https://content.ashford.edu/
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