Following on the recent post about business models, we want to cover an equally important topic: business structures. While business models define how your business will provide goods or services and get revenue, business structures refer to the legal structure chosen for your business. This post covers structures most common to home business, though other business structures exist. Choosing the appropriate structure is important for these reasons:
– Affects the amount of taxes the business will pay
– Personal liability for business-related issues
– Impacts your ability to raise money when starting up a business
– Determines the amount of business forms required by the IRS
– Legal costs associated with starting the business
For home business, three business structures are commonly used: Sole Proprietorships, Partnerships, and Limited Liability Corporations (LLC). Also possible are non-profit organizations and corporations, but these are less common for home business.
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