Three Basic Types of Business Ownership Structures: Advantages and Disadvantages
There are three basic types of business structures. You should know the basic ways before getting into a business situation to avoid potential problems. The three basic types of business structures are as follows:
i) Unique property:
This type of business is owned by a person called an owner. The owner runs the business. Some disadvantages are the following: the owner assumes all the risks of the business and the creditors can assume the personal assets. One of the main advantages of sole proprietorship is that the owner makes all the decisions.
ii) Association:
a) The business structure of the general partnership is owned by more than one person.
One or more partners can manage the business. As for the disadvantages, like sole proprietorship, the partners assume the risks of the business and their assets can be assumed by the creditors. Additionally, partners may disagree on the best way to run the business, which could result in a conflict. An advantage of a partnership is that the owners share the risks and the decision making.
b) There is another form of business structure in the field of associations, which is
called Limited Liability Company (LLP). This form is different from the general partnership structure. Liability is limited to the assets of the company in this commercial form.
iii) Corporation:
a) The general corporation is owned by shareholders (or shareholders).
Generally, a corporation can have many owners and often employ professional managers. The owner’s risk is generally limited to their personal investments and they often have very little influence on business decisions. However, the veil of the corporation can be pierced if the corporation is negligent in its operation.
b) The next corporate form is the Limited Liability Corporation (LLC). This
The structure is different for the general corporate form. As the name implies, liability is limited in this way in relation to the overall corporate structure.
c) Finally, there is the non-profit corporation. This type of corporation
they are typically 501 (c) such as a church, community organizations, a public high school, YMCA, and the like. Tax structures are normally different for the for-profit organization and relative to non-profit corporations.
Before making a business decision, it is best to consult a professional in the field, such as an attorney who specializes in the field of company formation. There are also some business consulting firms where you can get help. The Small Business Association also has a group of people available to help known as the Service Corps of Retired Executives (SCORE) or Small Business Counselors of America.
