There are different types of business entity. If you are planning to start a small business, you will have to select the right type of business structure to maximize your chances of financial and operational success. The two most common types of business structures are the Sole Proprietorship and Partnership.
Sole Proprietorships and Partnerships are common in the following areas:
- If there is any lawsuits filed against the business, the owners will be personally liable.
- Forming a sole proprietorship and a partnership does not require state filing.
- A sole proprietorship or a partnership is easy to form and operate.
- The owner has to report business profit and loss on their personal tax return.
3 main differences between a sole proprietorship and partnership
- A sole proprietor is one owner.
A partnership consists of more than one business owner.
- A sole proprietor is solely responsible for all business decisions and legal liabilities. All issues related to the business will be her ultimate responsibility.
A partnership has at the minimum two business owners, and they share all the liability, decision making and responsibility for the business.
- A sole proprietor usually fund the business out of their own pocket or with a credit card.
A partnership has the benefit of shared resources, and easier to obtain business funding.
Whether you are starting a sole proprietorship or a partnership company, or any other companies, the legal and official processing can be confusing. If you prefer not to be hindered by all the legal applications and submission of forms, you can seek the help of Gov Doc Filing experts.
Once you have confirmed your business entity type, you can begin to apply for EIN or the Employer Identification number. It is also known as the Federal Tax Identification number. This is a 9-digit number assigned by the Inland Revenue Service or IRS to identify taxpayers who are required to efile various business tax returns.
If you are interested to start a Limited Liability Company, you may need to know how to apply for an LLC.
- First, choose an available business name for your LLC.
- File formal paperwork, usually called articles of organization, and pay the filing fee depending on your state’s rules.
- Create an LLC operating agreement.
- Obtain the necessary licenses and permits required for your LLC.