Shrine Treasurers
Association
1
What are the Various
Business Structures?
• Sole Proprietorship
• Partnership
• Corporation
• Limited Liability Partnership (LLP)
• Limited Liability Corporation (LLC)
2
What is a Sole
Proprietorship?
A sole proprietorship is a type of
business entity that is owned and
operated by one individual and in which
there is no legal distinction between
the owner and the business
3
What is a Partnership?
A partnership is a business formed
between two or more people who share
in the profits and the liabilities
4
What is a Corporation?
An association of individuals, created by
law or under authority of law, having a
continuous existence independent of the
existences of its members, and powers
and liabilities distinct from those of
its members
5
What is a Limited
Liability Partnership?
A limited liability partnership
is a partnership of one or more general
partners, who manage the business, and
one or more limited partners, who invest
in the partnership but do not manage it
6
What is a Limited
Liability Corporation?
A limited liability company is a type of
business entity that combines the
personal liability protection of a
corporation with the tax benefits and
simplicity of a partnership
7
Pros & Cons
• Sole Proprietorship
• Partnership
• Corporation
• Limited Liability Partnership (LLP)
• Limited Liability Corporation (LLC)
8
Sole Proprietorship
Advantages:
• You have complete control of the
decision making of the business
• Sale or transfer can only take place at
your consent
• No corporate tax payments
• Minimal legal costs to form a sole
proprietorship
• Few formal business requirements
9
Sole Proprietorship
Disadvantages:
• Personally liable for the business
• Can not simply declare that the
business was bankrupt and cut losses
10
Partnership
Advantages:
•
•
•
•
•
•
•
Two heads (or more) are better than one
Easy to establish and start-up costs are low
Greater borrowing capacity
Opportunity for income splitting
Partners’ business affairs are private
Limited external regulation
Easy to change your legal structure later if
circumstances change.
11
Partnership
Disadvantages:
• Liability for the debts is unlimited
• Partners are ‘jointly and severally’ liable for
the partnership’s debts
• Risk of disagreements and friction among
partners
• Each partner is liable for actions by other
partners
• If partners join or leave, can be costly to
value partnership assets for buy in or buy
out
12
Corporation
Advantages:
• Liability of the owners is limited to their investment
in the company. Only the owners' contribution is at
stake rather than their personal assets
• The corporation is considered a legal person with
perpetual existence. It exists until it is liquidated
• Death or change in ownership has no effect on the
corporation
• The ownership is represented by the number of
share certificates held by a person, and this makes
the transfer of ownership very easy
13
Corporation
Disadvantages:
• Establishing a corporation is a complex process
• Shareholders delegate the governance function to a
body of persons called board of directors. The board of
directors hires management to look after the day to day
affairs of the corporation. It is quite possible that the
management may act to further their own interests rather
than the interest of the owners of the corporation
• In case of corporations there is double taxation. First of
all the corporate income is taxed at a flat rate and then
the dividends paid to the shareholders is taxed
14
Limited Liability Partnership
(LLP)
Advantages:
•
•
•
•
Limited partnerships allow pass-through taxation
Losses limited to the money invested for limited
partners making it easier to raise money
Partners have limited liability, from errors, omissions,
negligence, or malpractice committed by other partners
By allowing limited partners to be responsible only for
the capital invested in the partnership (and thus limiting
personal liability), limited partnerships offer significant
advantages as an investment vehicle.
15
Limited Liability Partnership
(LLP)
Disadvantages:
•
However, limited partners do not have the same
amount of control over a partnership as a general
partner.
16
Limited Liability Corporation
(LLC)
Advantages:
•
•
•
•
Like a corporation, an "LLC", is a separate and
distinct legal entity
LLC can obtain a tax identification number, open a
bank account and do business, all under its own
name
Owners, known as members, have "limited
liability", meaning that, under most circumstances,
they are not personally liable for the debts and
liabilities of the LLC
For U.S. federal income tax purposes, an LLC is
treated by default as a pass-through entity
17
Limited Liability Corporation
(LLC)
Disadvantages:
•
•
The principals of LLCs use many different titles—
e.g., member, manager, managing member,
managing director, chief executive officer,
president, and partner. As such, it can be difficult to
determine who actually has the authority to enter
into a contract on the LLC's behalf
Many individuals and Judges do not understand
and may find ways to “pierce the veil” to find
personal liability
18
What is a Answer?
Control vs Liability
19
Thank You
for Opportunity
to be with You !
Questions?
20