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Company Ownership/Structure

There are several options open to you when you are thinking about your company ownership and how to structure it. Business plans typically feature the company's ownership and structure prominently in the very first sentence. There are generally three types of structures open to you, with at least two of them containing a subsection. The Limited Liability Corporation (LLC) is a very common choice in business plans because it affords the owners a great deal of flexibility, and distances their company from themselves. In many states, however, it is tied to the life of its owners and if you want to take the company public, or provide shares of the company to employees, it's not a good choice. On the other end of the spectrum, a sole proprietorship is tied explicitly to you, the business owner. That means you are responsible for all liabilities of the business. Your business' problems will therefore be undertaken and solved by you.

The best way to break down the different kinds of Corporations, S- and C-Corps, is to use a real-world example. Let's say you are writing business plans to create an IT business in Chicago, and you are very interested in incorporating your business. The major benefit of incorporating is that a corporation is a separate legal entity in regards to state law. It can exist in perpetuity (unlike an LLC) and it can do everything a regular person can do—buy and sell property, it can sue (and be sued), and it has a number of other powers—guided by the law, of course. If you're a start-up, however, you'll want to become a subchapter-S corporation, which will give you all the benefits of being a corporation, but save you from being taxed at the corporate level and then again when profits are distributed to shareholders. Your IT business in Chicago, then, should only be taxed once.

A limited liability partnership acts like a limited partnership, but allows you to take an active role in your Chicago-based IT company, but without suffering from the personal liability for the acts of others—except to their investment in the LLP. Ultimately, how you structure your company depends on what you want to get out of it. Your business plans should always reflect the best choice for you and your company.

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