The rules for incorporation can vary from state to state, but most states offer the following legal structures to incorporate your business:
An LLC or legal liability company combines two models: a sole proprietorship and a partnership
. LLCs can have a bank account, hire employees and buy property.
The owner of an LLC is called a member, and LLCs can have a single member or multiple members who own different percentages of the business. Even though multiple members are allowed, a person who is not a founding member of the LLC can't purchase ownership in the company. Essentially this means that the LLC can’t sell stock like a corporation can.
With this incorporation structure, owners are eligible for a corporate shareholder’s limited liability, so they're not responsible for their company’s debt or losses. The owners of an S Corpcan have two kinds of shares in the company that either give them voting rights or not. All owners of S Corps need to pay taxes as if they’re a member in a partnership or a sole proprietor
Partnerships are formed when two or more individuals join together with the same business objective in a formal agreement. Partners share profits and liabilities based on the individual contract terms. After sole proprietorship, partnerships are the simplest form of a business entity defined under U.S. law.
A sole proprietor is a person who owns an unregistered or unincorporated business called a sole proprietorship. The business owner is also the only employee and has the liberty to make decisions on the business's behalf. This person is also responsible for paying personal taxes and any business liabilities.
This type of corporation is owned by shareholders and governed by the laws established by them. Shareholders are taxed separately from the C Corporation, and they are required to vote on a board of directors and hold annual meetings. Large corporations like Apple and Walmart are examples of this kind of corporation.
These are organizations that take in money and spend it in ways that address a social cause or have a public benefit rather than setting out to make a profit. Nonprofit status is famous for meaning that an organization doesn't have to pay tax on things every private individual has to pay, like sales and property tax.