Corporate Credit Southfield, Mi What Business Type Is Right For You?

As you embark on a new business endeavor and have decided what kind of business to run and even what you want to call it, you still have something to sort out. You need to know what type of business to run.

Are you familiar with the terms LLC, C-Corp and S-Corp? If your answer is that you have heard of them, but don't always understand the difference, read up!

There are a number of business structures you can use when you are creating a company. Each one comes with different benefits and liabilities. Here's a quick overview:

Sole Proprietorship This is a one-man band in which the person running the business has a chance for all the profits, but also carries all the responsibility and a loan to a sole proprietor is called a personal loan. This is not a business structure and could be putting their personal assets at risk if the company were to have serious financial difficulties and/or asked to pay debts.

Partnership In a partnership, two or more people are working together on the business endeavor. All usually put similar amounts of money and time into the business and they are all responsible for running the business. They can also incur debt and be held personally liable if the company were to fail or be sued for debts.

Limited Partnership In a limited partnership there are at least two partners involved in the business, but not necessarily at the same levels. One or more of the partners will operate as general partners, meaning they take part in decisions and management, while the other(s) are more silent partners who offer financing, but do not get involved with the business operations. The general partner, who is running things, is the one held responsible for profits, and losses, of the partnership.

Limited Liability Company (LLC) Once you move to this type of company, you are taking the burden off of your personal shoulders and putting the company on it's own two feet. This is an important step to take. When you get to this level of business understand that any liabilities are only taken from business assets, not the personal assets of those who own the company.

C-Corporation - If you would like to have a business structure that will help you see a lot of deductions, which means you can keep more of your profits, you may want to go the c-corp. route. A C-corporation is it's own creature and can provide goods and services, own it's own assets and also take on any liabilities that the company may face. This type of business structure will also give you a little flexibility for when you want the fiscal year to end - 3/31, 6/30, 9/30, or 12/31.

S-Corporation - An S-corporation is the next step up in the line and is a business structure where any profits of the company are to be handed on to the shareholders. This type of corporation offers a number of deductible expenses to shareholders. If you are the sole owner, you would own 100% of the stock in the company.

When it comes to what banks think about business structures, they are more likely to offer lines of credit and loans to those companies that have the higher rated business structures, like the LLC and corporations.

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