In the United States, there are several business structures. However, 4 of them are the most common structures that everyone should know. Those are:
- Sole Proprietorship
- Limited Liability Company (LLC)
According to the Internal Revenue Service (IRS), sole proprietorships are the most common business structures in the United States. Sole props allow the owner(s) to take control of their businesses and are usually working from home. Basically, a sole prop owner is someone who runs an unincorporated business by himself or herself.
Maintaining their own records and paying the IRS as self-employment taxes are simply a sole proprietor’s responsibilities. If you own an LLC as a single member, this does not mean that you are a sole proprietor as your company will be treated as in an LLC form. Sole props are not the business structures that primarily need an EIN. However, we strongly recommend that you get one as it provides legal protection and benefits.
In the partnership structure, two or more people share the control and responsibility of business. It is a good idea to sign a legally binding agreement between all partners to avoid possible disputes. We can list some of the issues that should be included in this agreement as follows:
- how to make decisions
- the amount of investment each partner will initially make
- the roles, responsibilities, and rights of each partner
- the method of sharing profit and loss
- when and how to distribute profit
- how to resolve disputes
- how to take new partners
- how existing partners can leave the partnership