Aug 01, 2022
In Fashion Forum
Having two or more people equally invested in the business' success allows you to pool resources. It also means you have access to more than one person's skill set and expertise. Cons: Just like a sole proprietor, partners have full, shared liability if the business goes south. That also means that partners aren't just liable for their own actions, but also the actions of their partner(s). There is a variant on partnerships called a limited liability partnership, or LLP, that protects against that — which is how most law firms are organized, for example. Finally, when more than one person is involved in decisions, there's room for disagreement — which means it's important to have an explicit agreement over how the obligations and earnings will be split, especially if when things go wrong. How taxes work To form a partnership, you have to register your business with your state, a process generally done through your Secretary of State's office. Find IRS tax forms here. 3. Limited liability company (LLC) Example: A small design firm. What it is: LLCs are a type of fax number list business structure that's more complex than sole proprietorships and partnerships, but less complex than corporations. They are called "pass-through entities" because they're not subject to a separate level of tax. Most states don't restrict ownership on LLCs, and so members can include individuals, corporations, and even other LLCs and foreign entities. Most states also permit "single-member" LLCs, those having only one owner. Pros As the name suggests, owners of an LLC have limited liability, meaning that they personally are not responsible for any financial or legal faults of the business. This reduction in risk is what makes an LLC a very popular business structure. Cons: LLCs are often more complex than sole proprietorships or partnerships, which means higher initial costs, and certain venture capital funds are hesitant to invest in LLCs because of tax considerations and the aforementioned complexity. That being said, they're simpler to operate than a corporation because they aren't subject to as many formalities.