What, in layman's terms, are the differences in Inc., LLC, Co., --there are more.?
I am opening a web, online store, and I need to know which to choose from. LLC, Inc., etc.
- 1 decade agoFavorite Answer
Whenever somebody is going to start a new business, they've got to confront the question of the business structure. There are a number of options available.
One of the easiest to get going is the "sole proprietorship." This is basically a one-person operation where you perform the duties of owner, manager, and employee. These structures are good because it's easy for you to make decisions, there aren't a lot of regulatory requirements involved in setting up this kind of business, and there's no such thing as "double taxation" (a disadvantage to corporations, but I'll touch on that). Perhaps the most significant disadvantage is that you have unlimited personal liability for the actions of the business. In other business structures, if you get sued, you can protect your personal assets (your house, car, et cetera). In the case of the sole proprietorship, any and ALL assets you own are at risk. Also, the business normally stops existing if the owner dies or can't operate the business anymore. All income from the business is looked at as your own income for tax purposes, just as if you were getting a paycheck from an employer, and normally the capital of the business is limited to what the you own.
Another kind of structure is a "partnership." This is where two or more people join together to operate the business. In the US, there are two kinds - - general partnerships (where the owners share equally in liability) and limited partnerships (where a "limited" partner's liability can be defined in various ways). Parterships are good because they are relatively simple to establish, and there's a lot of flexibility in terms of how you structure the agreement between the owners. Plus, it's easier to raise capital for the business, you can spread liability amongst the partners, and you can make decisions regarding who can be a partner. But you still have the disadvantage of unlimited personal liability for the transgressions of the business, just like in the case of the sole proprietorship. There's also the disadvantage of what's called "uncertain duration," meaning that the partnership can be dissolved whenever any of the general partners stops being a partner.
A "corporation" is that last basic form. Here, things are really rather different because the corporation is actually a separate entity from the owners. The corporation is a distinct legal entity made up of an association of people and is created by legal statute. One of the most significant advantages of a corporation is that its owners and employees are normally protected from the personal liability vulerability associated with the other business structures. This generally means that if the corporation gets sued, the only assets at risk are those of the corporation, and not those of any individual member or employee. With some forms of corporations (but not with the so-called "S-corporations"), you had the disadvantage of what is called "double taxation." What this means is that the salary you draw as an owner or employee of the corporation is taxed, but so is the income earned by the corporation itself. Corporations are normally the most complex of the three basic forms to set up, and most of the time we'd need the help of a lawyer and/or accountant to get it build. Public corporations can acquire capital through the sale of stock, a capital-generating option not available to the other business formats.
The "LLC" you mention stands for "Limited Liability Corporation," and is really a hybrid between a partnership and a corporation. The LLC normally has the same "pass through" income advantage that sole proprietorships and partnerships have, meaning that earnings are treated as personal income, and also has the advantage of limiting personal liability for the actions of the business. In most jursidications, you'll have to pay fees and some taxes, and LLC's do normally require that a lawyer and/or accountant set it up, but it's a really common way of organizing a relatively small business.
"Co." just means "Company," and doesn't really mean anything special other than you are representing the business as some kind of viable economic entity. A sole proprietorship can call itself "company" if it wants. I can call myself "Mike's Pizza Company" without any formal business structure.
Now, believe me, I'm not trying to do or say anything to make laywers or accountants rich, but I strongly suggest that as part of your business set up you find a good business attorney who can advise you on what kind of business structure makes the best sense for you, and then help you build it correctly. I know that as a "start up" it can be hard to get the money for these consultations, but it is cheap insurance when you think about what could happen if you try and "wing it" without the right support. After that, you'll need an accountant to make sure that all your taxes are done right. Getting the business going and then finding out a few years later from the IRS that something wasn't done right can cost a lot more than what the accountant will charge you.
Hope this helps, and good luck with it!
- PamelaLv 44 years ago
Conservatives (most Republicans) believe in conserving money and using it to pay what we owe instead of spending it on more things and hoping someone will come along and pay it later. They are for small federal government and don't want a society like that in "1982" by george Orwell. We believe that we should be able to spend our money how we want to spend it. We believe that individual states should have control over decisions such as prostitution and abortion that way if the majority of your state is against it then most of the people in your state don't have to suffer having an abortion clinic on every street corner. Liberals (most Democrats) want a large centralized government. They want to be big brother and tell everyone how they should live and force them to live that way. They believe that the people are not capable of making the tough decisions and so they make them for them. They are more for social reforms like Welfare and Social Security. Bigger government means more bureaucrats. Most of them think we should have freedom from religion not freedom of religion.
- 1 decade ago
A simple answer to this question is the difference is in what you are liable for if you go bankrupt or are sued. Here is an article explaining the different business types http://www.home-business-expo.com/8172006_Incorpor...Source(s): http://www.home-business-expo.com/wiki
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- 1 decade ago
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