Starting a new business comes with a lot of steps, and one of the most overlooked ones is which business structure to go with. It’s not nearly as exciting as developing a marketing plan or as intensive as laying out a budget, but it’s still essential.
Today, we’re going to be examining the different types of LLCs out there if you’ve decided that you should go along the LLC path. You might have a lot of questions when it comes to LLCs.
How is an LLC different from other business structures? How many kinds of LLCs are out there? What is a Series LLC? Is it the best option for me? What makes a company a corporation?
Below, we’re going to run through the different types of LLCs to give you a quick overview.
This one is relatively easy to understand, as a general partnership is when two or more members come together to form a business. The owners are going to take responsibility for just about everything, such as transactions, debts, taxes, etc.
The owners are going to pay taxes on their business income share when April 15th rolls around. This LLC is ideal for those in small or medium-sized businesses.
Family Limited Partnerships
These kinds of partnerships are a bit different than limited partnerships. Limited partnerships are when multiple owners share responsibilities for the business, but the main difference is that a single member must maintain total liability leaving other members to keep little accountability.
So, can you guess what a family limited partnership is?
It’s the same exact thing as a limited partnership but owned by a family. Typically, families use an LLC to put their property into the company itself. It’s also much easier to accept new members or pass control between other members.
Returning to one of our original questions, just what is a Series LLC? It’s not so easy to distinguish what a Series LLC is only by the name itself.
It’s a bit complicated, but Series LLCs can designate debts, certain obligations, and other rights to small cells or levels, which are known as series.
These different series can be various members, assets, interests, or even managers. It’s important to note that Series LLCs are not available in all states, currently being available in only seven at the moment.
Delaware was the first state to offer Series LLCs as options, completing another first for them after being the first state to ratify the Constitution.
Single-Member LLC/Sole Proprietorship
We saved the simplest and most common one for the last spot. When someone says they’re opening their own small business, they usually refer to a sole proprietorship.
Overall, these types of business structures are pretty similar. The main difference is if single-member LLC decides not to become a corporation, then they become a sole proprietorship. If they do choose to become a corporation, then they are a single-member LLC.
Owners have complete control over the company and tend to be home-based businesses, retail stores, or even one-man accounting firms.
Owners are responsible for their own record-keeping, reporting to the IRS, and must pay self-employment taxes. This type of business offers no protection, as you might see from an LLC, so it’s important to know the risks ahead of time.
Image Credits: Nik MacMillan