There are many different ways that a business can be set up. They each have unique characteristics. Whether or not a particular business structure is right for a particular situation depends upon a number of factors.
Examples of business structures are: Sole Proprietorships, Partnerships, Corporations and Limited Liability Companies (LLCs).
Some types of business structures might not be available in all situations. The decision of what kind of business structure should be selected is an important decision that will have serious effects that will last, hopefully, for many years.
One of the important considerations is the amount and method by which businesses pay taxes. Businesses pay a huge amount of taxes. The tax burden on businesses is one of the main reasons that it is so difficult to run a successful business. Even with a well thought out tax strategy a business pays a large amount of taxes. Anyone that runs a business and does not take steps to reduce the tax burden will not be in business long.
Another important consideration is protection from creditors and lawsuits. Some business structures allow for protection of one’s personal assets. Other business structures offer no protection at all. There are ways that a business structure that normally has protection can lose that protection. This is known as “Piercing the Corporate Veil“.