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Business Entities – A Quick Guide

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Business entities comes in so many types that business owners can easily
get confused. Here’s a quick guide that will hopefully shed a little
light on business entities for you.

business entity, guide

Article Body:
Business entities comes in so many types that business owners can easily
get confused. Here’s a quick guide that will hopefully shed a little
light on business entities for you.

Business Entities

"C" Corporation: A corporation whose shares are held by shareholders. The
entity stands apart from the shareholders for legal and tax purposes. The
shares of the corporation may be “taken public” and traded on stock
markets. Google is an example of a publicly traded “C” corporation.

Foreign Corporation: A corporation doing business in a jurisdiction
beyond where it was formed. Microsoft is a Washington corporation. When
it does business in New York, it is considered a “foreign corporation.”

General Partnership: A business effort involving two or more people,
known as partners. Each partner is liable for all partnership debts and
obligations regardless participation and contribution amounts. Put
another way, a general partnership provides no protection against

Holding Company: Part of a double incorporation strategy. The sole
purpose of a holding company is to own or control other companies. Said
other companies typically are exposed to significant liability threats.
For instance, many insurance companies use holding companies to suck off
profits and limit lawsuit risks.

Joint Venture: A cooperative business effort between two or more parties.
It is usually limited to a single business purpose and involves a sharing
of responsibilities and revenues. For instance, a database programmer and
web site designer might enter a joint venture to provide e-commerce
solutions to businesses.

“LLC” - Limited Liability Company: A creation of state law in which one
or more individuals form an entity providing the liability protection of
a corporation, but the tax benefits of a partnership.
Limited Partnership: A partnership in which the business is managed by a
general partner with limited partners supplying capital investment. The
limited partners are prohibited from actively participating in the
management of the partnership. In exchange, the limited partners
liability is limited to the amount of their investment. In pursuing this
business entity, the general partner is almost always a corporation.

Partnership by Estoppel: A partnership created by operation of law when
two or more people pursue a business goal and hold themselves out to the
public as such. This business entity is prevalent as it is the automatic
designation for two people doing business who fail to take any steps to
designate a business entity. In this entity, each partner is completely
exposed to liability risks.

"S" Corporation: Similar to a “C” corporation, this entity provides solid
asset protection for shareholders from business liabilities and debts.
The primary difference is the entity can be taxed as a pass through
entity and is limited to 75 shareholders.

Sole Proprietorship: A business owned and controlled by one person. The
designation provides no protection from business liabilities. It is taxed
on the person’s personal tax returns on schedule “C”.

Each of the above entities provides certain advantages to a business
owner. If you consider the particulars of your efforts, you should be
able to get an idea of which one is best for you.

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