THERE ARE various decisions we make before establishing any form of business. Before laying the foundations of the business, it is imperative to acquire certifications and licenses from higher authorities. This will enable you get legal structure for the business. After being issued certifications, you can raise funds to kick off the business. While operating the business, you are required to pay taxes. With such certifications, you will be able to conduct business anywhere.

Generally, there are various forms of business you can opt for. A good example is a corporation. Others include partnership and sole proprietorship. Growing in popularity recently, there is also the limited liability company (LLC). Another recent introduction is limited liability partnership. The selection of these forms of businesses depends on your requirements. The taxes charged differ. However, it is advisable to choose the one which you can effectively handle. Tax agencies should be notified in case you shift to another form of business.

This is the most common basic business structure, especially for home-based businesses. A sole proprietorship structure refers to business which is entirely owned, operated and managed by one individual. It is ideal for people who prefer working alone. The taxes charged are a lot less. Personal income tax is charged. The tax is based on the total income as well as expenses. Losses and profits are written down on a Schedule C and personal tax returns are then calculated. Incidences of loss are very minimal since personal tax returns do not affect total income. The owner of the business is expected to fill Schedule SE so that taxes are easily deducted. This also helps the business owner to calculate all taxes required. It is also possible to approximate tax payments.

Depending on the state, payment of taxes can be distributed on a monthly basis. Usually, a sole proprietor is expected to pay taxes once. This makes it one of the most preferred basic business structures. The sole proprietor takes full control of the business. He or she is the decision maker. Sole proprietor takes control of business’ liabilities. This means his or her property is at risk. In case you cannot pay debts, the assets can be seized. Getting money to start the business may not be simple since most loaning institutions do not give loans to such businesses. Personal savings are the major source of finance.

This is a form of business structures managed by two or more people. General partnerships are good examples. Limited partnerships are also available. General partnership involves two or more people who are responsible for making decisions and meeting other obligations. On the other hand, in a limited partnership, the parties only operate the business. There is typically a sole investor. The partners do not take control of the business. Taxes paid are less since they are not based on income. Running a partnership can be quite expensive due to various accounting services required.

Corporation is the most expensive basic business structure as large taxes are required. There are also regulations which should be adhered to when establishing a corporation. The owners of the business enjoy liability protection whereby their personal properties and assets are not at risk of being seized.