Accounting: Common Legal Business Types
Sole proprietorship
A simple business structure run by one person for their benefit. It’s easy to form and gives the owner complete control.
Partnership
A business owned by two or more people who share in the profits and losses. General partnerships divide rights and responsibilities equally among partners, while limited partnerships have both general and limited partners with different responsibilities.
Corporation
A legal entity that operates under state law and is separate from its owners, managers, and controllers. Corporations are double-taxed, meaning the company and each shareholder pay income taxes on the same source of income.
Limited liability company (LLC)
A corporation and a partnership hybrid allows business owners to benefit from both structures.
S Corporation
A corporation that passes profits and losses directly to the owner’s income without corporate tax rates. S corporations can’t have more than 100 shareholders, and all shareholders must be US citizens.
Nonprofit corporation
A business that focuses on the public good, such as charity, education, or scientific organizations. Nonprofits receive tax-exempt status from the IRS but must keep detailed records and file extra paperwork to maintain their classification.
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Accounting: Common Legal Business Types
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