PainterConsulting, Inc.

Types of Businesses


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There are four basic types of Businesses  

Type of business / Ownership Best for Tax Implications Legal Status
Sole proprietorship/

 Individual

Lone-wolf types averse to paperwork and not planning to sell the business File a From 1040, Schedule C; profits taxed at individual rates Personally responsible for debts; owner can be sued for business mishaps
Partnership /

Two or more people

Small businesses planning on expanding by adding employees who can later become partners File a Form 1065; share of profits taxed at individual rate Partners are personally responsible for debts, even those incurred by a single partner
Limited-liability company (LLC)/

One or more people

Small businesses with some legal risk, such as contractors or bed and breakfast owners Similar to a partnership, but with the option to switch to corporate tax treatment Partners' liability is limited to their initial investment
S corporation /

Up to 75 shareholders

Tax-sensitive small-business owners who want the legal protection of a corporation Profits taxed at individual rate, which is often lower than corporate rates Shareholders generally aren't liable for corporation's debt
C corporation /

Unlimited number of shareholders

Business planning on hiring several employees, retaining profits for future expansion, and seeking outside investment Profits taxed at higher corporate rate, but losses can be carried forward to reduce future taxes Shareholders generally aren't liable for corporation's debt

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DISCLAIMER: The information at this web site is for advertising and general information purposes. This information is not intended to be used without consultation with PainterConsulting, Inc.  We recommend you contact the firm for specific questions.