There are many types of business arrangements, which depend on various factors such as paperwork, taxes, investment, how much you invest in machinery, and your level of personal liability. For example, there are a partnership, limited liability company, partnership agreement, proprietor-share holder partnership agreement, proprietor-beneficiary agreement, merchant agreement, property contracts, purchase and sale contract, and franchise agreements.
There are also business formation documents, registration of your new company, and change of ownership documents. Other types of arrangements include debtor-assignment agreement, land contract, partnership agreement, mortgage agreement, and sales and distribution agreement. All of these types of business arrangements can be used to create a legal structure for your business. The most common types of business ownership structures include sole proprietorship, partnership, limited liability company, and corporation. Each one has their own set of advantages and disadvantages depending on individual circumstances. However, there are some common characteristics among all of these arrangements.
A sole proprietorship is often seen as the simplest form of business structure. It consists of one person who usually owns the entire business. In a sole proprietorship, only that person is legally considered the owner and all other shareholders are considered partners. However, in a corporation all shareholders are considered one person.
Limited Liability Company:
Also known as LLC or a Limited Liability Corporation, is another common type of business structure. This arrangement has some advantages and disadvantages. For one, an LLC has more protection from double taxation. Because an LLC has only one owner, it is treated as a single person and therefore is not taxed at the corporate level just like corporations are. On the down side, an LLC cannot have the same benefits as partnerships, although it does have advantages such as having no requirement for a profit.
In order to qualify as a small business, there are a few requirements that must be met including being a one-person business. The advantage to this is that you do not have to pay personal income taxes on the profits which saves you a lot of money. There are also many tax benefits available to small businesses such as being able to deduct your business expenses such as rent, advertising, utilities, payroll, sales, and many other types of business-related expenses. Having two people or partners in a small business is also easier to track because it only involves one set of books.
Private Equity Partnerships:
Also called PEOs and PHOs, a private equity partnership is a great option for a small business if there is not enough capital to go for a corporation. With a PEO or PPO, two or more people form a partnership and share in the profits. It is important to note that the IRS treats a PPO just like a corporation even though it is a partnership. With the correct paperwork and partnership agreement, this can be a very attractive option.