When it comes to starting your own business, you have to consider the type of business that you’re actually going to set up. Typically, there are basically four categories of business: Individual Entrepreneurism, Business Entrepreneurship, Medium-Sized Businesses, and Large Businesses. There are numerous reasons why it’s vital to own a business, and a few of these include: To generate income. To make enough money to support your family. To be financially secure.
A personal liability company is a great option for people who wish to open their own business but don’t have enough capital to do so. Generally, these types of business are considered the “other” type of business when compared to medium or large sized businesses. This is due to the fact that you will not be running a large building or have many employees with benefits and health insurance. However, this can definitely change over time as your business begins to grow. In order to protect yourself from personal liability claims, you should consult with a qualified attorney in your jurisdiction to determine the pros and cons of incorporating.
Limited Liability Companies (LLCs) are similar to corporations, but they operate under a set of special rules that differ from sole proprietorships. As opposed to corporations, an individual has limited liability. If they cause injury to another person, they are only liable for that amount. Additionally, when an individual owns a LLC, they are only required to pay taxes on the profits from the company. They are not required to pay taxes on the sales that took place within the course of the business or on the services that were purchased.
Another difference between a corporation and an LLC is that the owner of an LLC can use their personal assets to take out loans against their LLC. The same cannot be said about a corporation. Loans are not possible for an LLC because they do not own the property. If the owner’s personal assets are used to finance the LLC, they are required to pay income tax on the amount of money they owe back to the IRS. Because of this reason, it is usually recommended that small businesses incorporate as a C corporation so that their taxes will be lower.
One final difference between an S or L corporation and an LLC is that an S corporation requires that all partners sign a fidelity bond. If one partner does not sign the bond, then the partnership will become a disregarded entity and will lose its status as a partnership. An LLC, on the other hand, does not require the same kind of fidelity bonds. If an LLC has more than one partner, however, the partners must still sign the fidelity bond or else the LLC will be deemed a partnership and will be required to pay taxes on the income it brings in.
There is a popular saying that states, “Money can’t buy loyalty, but it can buy honesty.” This saying may be related to how partnerships and LLCs operate. Partnerships can be honest and provide honest service to their clients; however, they cannot be both. When using these business structures, it is very important that both partners are honest and provide honest services to the business to prevent liabilities.