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Four of the most common business structures

On Behalf of | Nov 18, 2022 | Business Law & Litigation

Starting a business in Northern California can be exciting, but it can also be confusing and nerve-wracking. Knowing how to perform a certain service or provide a certain product is a very important part of the business, but it is only part of running a business.

New business owners may not fully understand the finer points of managing employees, drafting contracts, maintaining the finances and even determining the correct business structure. However, if these various aspects of the business are not done correctly, the business could suffer.

Common options for business structures

This process starts with choosing the correct business structure for the business, which means business owners need to understand the different options.

  • Partnership: Partnerships can be set up in different ways, but generally most of the profits and debts pass through to the owners of the company.
  • Limited Liability Company: LLCs are also pass-through entities, meaning that profits and losses pass through to individual owners for tax purposes. However, unlike many partnerships, the owners are not personally liable for debts and other actions of the company.
  • S-Corporation: Corporations set up a completely separate entity that protects the owners from liability. Shareholders are the owners of the company, and this can give the company different options for funding. S-corporations are set up as pass-through entities to the owners for tax purposes
  • C-corporations: Very similar to S-corporations, but the biggest difference is that they are not pass-through entities. The corporation itself is taxed based on the profits of the company.

Before choosing a business structure in Northern California, the business owners need to know the goals and needs of the company to know which option is best.

Experienced attorneys understand what business structures may be appropriate for different business models and may be able to help companies choose the best option.