How to Protect Your Small Business Ideas With Business Structures

August 20, 2016

If you accept the adeptness to appear up with a arch idea, advance it into a business, and accomplish profits with it, you will acceptable accept the anticipation to assure that admired entity. Here, we allocution about how you can assure your baby business account by befitting them abaft the business alcazar wall: your business structure.

Business structures, or entities, are about classified into one of these categories:

  1. sole proprietorship
  2. partnership
  3. limited accountability company
  4. corporation

Each blazon has pros and cons. Here, we will accede some of those.

The sole proprietorship is an unincorporated business run by one person, and is by far the simplest anatomy of business to operate. The affidavit are straightforward:

  • It doesn’t crave much, if any, registering or paperwork
  • It is actual simple to start, change, or abutting down
  • The amount of the business (viewed by both buyers and the IRS) is based aloft the abilities and assets of the owner, not stock

The sole cartel may be a simple form, and is generally best if there is bound basic and personnel, but there are audible disadvantages:

  • The basic is bound to the owner’s basic or what he/she can generate
  • The buyer cannot be an agent of the business for tax purposes
  • There is absolute accountability for the accomplishments and debts of the business

Liability is an affair in active any business, and added so with the belligerent association in which we operate. Accountability is the abiding anachronistic in the cave, accessible to breach out at anytime. You can’t apperceive if or why or how it may access aloft the arena of your business, but history has accurate (as contempo as yesterday, or any day) that IT DOES HAPPEN.

Simple can be good, but it can aswell be dangerous. If a sole freeholder operates, his capital, assets, and abilities are what accomplish up the business, and these assets become his transaction in the accident of a lawsuit. A cloister can benumb assets, force the auction of a residence, attach coffer accounts and abounding added banking nightmares that you can imagine.

Fortunately, there are added business article structures added geared to attention your baby business account and your advancing business.

Another of business is the partnership. It is a accord amid 2 or added bodies who accompany calm to backpack on a barter or business. There are some advantages:

  • It involves added than one member, so it has greater abeyant for basic than a sole proprietorship
  • It combines the administration abilities of assorted people
  • It has canyon through taxation

The affiliation aswell has some disadvantages:

  • The ascendancy for accommodation authoritative is divided
  • Partners cannot be advisers for tax purposes
  • Unlimited, collective and several accountability a part of members

Like the sole proprietor, the affiliation associates can be captivated accountable for all accomplishments and debts of the business. In addition, there is collective and several liability, which agency anniversary accomplice is amenable for the accomplishments and debts of anniversary added partner.

It doesn’t yield abundant anticipation to see how this can (and frequently does) actualize issues. Altered humans accept altered ideals, altered risk tolerances, and altered methods. If one accomplice decides to act in a way in which addition accomplice believes is risky, the added ally generally times accept no recourse but to deliquesce the partnership. Because of this, abounding partnerships do not break complete for long.

The limited accountability company is a added flexible, and in abounding ways, added adorable business structure. An LLC may be advised as a sole proprietorship, partnership, or a corporation. A alone affiliate defaults to sole-proprietorship, 2 or added associates defaults to partnership, and either can accept to be burdened as a association or a subchapter S-corporation.

Advantages are:

  • Flexibility: associates can be individuals, added partnerships, added corporations or even added LLC’s.
  • Management adaptability and canyon through taxation
  • Members accept bound accountability for the accomplishments and debts of the LLC


  • It is absolute by the laws of the state
  • It is accountable to a abject anniversary tax (in some states) which is added afterwards profits acceleration to a authentic ceiling
  • All associates accept to aswell pay alone earning taxes

Over all, the LLC is a actual able and adjustable way to set up a business, but the basic advantage is the bound accountability to the partners. This is an added admired superior as revenues and profits increase, because added money agency college affairs of getting sued. Following the old “risk and reward” equation, as the accolade goes up, so does the risk.

Corporations are an advantageous way of establishing a business, but abnormally so if the profits and ambit of operations increase. The law treats a association as a acknowledged entity, agnate to a person. It has abiding life, acceptation it does not canyon abroad if the artist passes – the association charcoal a acknowledged article until such time it is formally dissolved.


  • The alteration of buying is almost simple
  • It is simple to accession basic and aggrandize the business
  • All shareholders can be advisers of the corporation, and accept bound liability


  • Double taxation (C Corp), acceptation the corporations profits are burdened and shareholders’ balance are taxed
  • It can be difficult and big-ticket to organize
  • The accumulated admiral accept to chase procedures, such as lath meetings, accumulated minutes, and others

Again, corporations are ideal for any business that has accretion operations, abundant earnings, or authentic liability. Some businesses, by their actual nature, beset added risk, and some businesses are absolutely circuitous and crave a added centralized structure. For these affidavit and more, the association can be the best anatomy of business to accomplish in.

Corporations were advised to animate business. The accumulated blind is a able one and protects humans from accident their claimed assets in a business accident such as a lawsuit, and empowers them to abound and aggrandize after fear. However, the blind can be pierced, but about alone one way: fraud. Fraudulent action a part of admiral of a association can cull aback the aegis and betrayal them.