Perhaps you want to start your own business, or you are interested in moving your way up in the company you currently work for. Maybe you just want to know more about the financial world and you are reading this article to brush up on your company knowledge. Regardless, read further for a better understanding of sole proprietorship, partnerships, corporations, and limited liability companies.

Sole Proprietorship

Sole proprietorship businesses are owned by an individual and that individual solely, hence the name. Most business sources agree that a sole proprietorship is the easiest way to begin a business. Examples of a sole proprietorship include small stores, doctors’ offices and attorneys’ businesses. This is also one of the cheapest ways to start a business. Not only are sole proprietorships the most common way that businesses begin but they are one of the least legally bound companies.

Partnerships

Partnerships are companies formed by two people that are co-owners of the business. There are three main types of partnerships. These include general partnerships, limited partnership, and master limited partnership.

Corporations

Corporations are the most common form of businesses in America. Often these have numerous shareholders, or investors who invest their money into the company. These individuals are able to make decisions and conduct business. The corporation, not the individuals, becomes responsible for debts and actions. There are several different kinds of corporations including government corporations, non-profit corporations, for-profit corporations, professional corporations and limited liability corporations. There are also subchapter S corporations. One advantage of a subchapter S corporation is that they can have an unlimited income from interest, rents, and royalties.

Limited Liability Companies

Finally, there are limited liability companies, or LLCs. These business structures give companies the ability to pay taxes in the same way partnerships allow. Along with corporations, the biggest advantage to a limited liability company is that the business members are not legally bound to the debts of the business should the business fail.

You may not be ready to take a test on companies, but, you now know more than you did about the different types of companies out there and how they work for you.