Different businesses will need to work with different legal forms in order to enjoy several unique advantages. However, not all of these forms and agreements are the same, and some may be limiting, depending on the position of the signer.
This is the easiest and most simple business solution to work with. It consists of one individual who owns all of the business structure and fills out a specific Schedule C form when they file their taxes. Plumbers, repairmen, and maids are some examples.
A partnership is similar to a sole proprietorship, only the ownership is divided between two or more people. They each contribute a different part of the agreement and share all of the losses and profits that come with the business venture.
This type of agreement is known as a limited liability company, and it offers the same liabilities as a corporation through an agreement that is more similar to a partnership. Each individual member of the group reports their taxes, though sometimes the business may need a single form filled as well.
An S corporation can rise from an ordinary corporation, which will allow the corporation to avoid being double taxed on their income. The IRS must designate the corporation accordingly first.
These general corporations are independent legal entities that are owned by shareholders. However, the business itself is liable for its debts and actions, rather than the individual shareholders themselves.
To learn more about the differences in U.S. legal business forms, checkout this infographic created by the University of Southern California’s Online Master of Laws program.