When beginning a business, we understand that we must decide what form of business entity to establish. Your form of business determines business filings for your chosen structure of business. The most common forms of business are the sole proprietorship, limited liability company, partnership, corporation and S corporation.
The general definition of business structure is the kind of relationship the owner has with his or her business. In other words, this is the legal relationship between the business owner and the business itself and affects how the owner files taxes. For example, in a sole proprietorship, the owner and the business are one entity and thus only one tax form is required. Conversely, in a corporation, the owner and the business are separate entities. As such, the owner and the corporation must file taxes separately.
In a partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be shared, disputes will be resolved, how future partner will be admitted to the partnership, how partners can be brought out, and what steps will be taken to dissolve the partnership when needed. Yes, its hard to think about a breakup when the business is just getting started, but many partnerships split up at crisis times, and unless there is a defined process, there will be even greater problems. There also must decide up-front how much time and capital each will... [continues]
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