What Are The Four Types Of Business Formations

There are four major types of business formations. If someone wants to develop a business, they can form a sole proprietorship, partnership, limited liability company, or a corporation. A sole proprietorship refers to a business that is owned and managed by one person. A partnership is a business where two people agree to be co-owners of a business and general participate in management and share the incoming profits. A limited liability company is relatively new in terms of business formations. It is a company that is a combination of a partnership and corporation. A corporation is different than a sole proprietorship and partnership. It is a separate legal business entity from the owners, and is also know as an “artificial person”. There are many advantages and disadvantages to all of these, but considering our business will be a healthy fast food restaurant and small shop, the best type of business for us is a corporation.

The first option of forming a business is a sole proprietorship. This is the most popular type of business in the United States because of …show more content…
Being similar to a partnership, a limited liability company can be taxed as a partnership which means the owners are taxed as their personal income and not through the business. A limited liability company is also quite flexible in terms of its ownership. Compared to a sole proprietorship and partnership, a limited liability company is very complex when it comes to actually forming the business. There are also different laws and regulations for a limited liability company which makes it owning a limited liability company difficult. Unlike a corporation, a limited liability company does not have to worry about regulation meetings and have less paperwork. Although similar to a corporation, they have to register as a foreign company if they want to do business in different