Dorado Management Services: Understanding The Different Business Structures

Last Updated:
October 19, 2022
Author:
Kay Nicole

A picture of a group of people looking out a window of their business after Dorado Management Services helped them

Before jumping into creating a business, mapping out a specific structure for the business can help reduce potential headaches down the road. Changing the structure of a business is never easy, nor necessarily recommended.

What business structures work best? And how can Dorado Management Services help when structuring your business? These main types of business structures provide great starting positions when launching a business.

Sole Proprietorship

A sole proprietorship is a business owned and operated by one individual. According to the U.S. Small Business Administration, this type of business is the most common in the United States. Much of that has to do with the overall ease of the setup process.

There are several benefits to owning a sole proprietorship. One benefit is that the owner has complete control over the business. The owner makes all decisions about the business.

Another benefit of a sole proprietorship is that the owner gets to keep all of the profits generated by the business. In a partnership or corporation, profits become divided among the owners or shareholders. In a sole proprietorship, the owner keeps all of the profits.

Finally, a sole proprietorship is relatively easy to set up and operate. There is no need to file paperwork with the state or local government to start the business. Unlike a partnership or corporation, a sole proprietorship does not have to pay any taxes on the business profits.

Despite these benefits, drawbacks exist to owning a sole proprietorship. One disadvantage is that the owner is personally responsible for all debts and losses incurred by the business. If the business fails, the owner's personal assets, such as their home or savings, could be at risk.

Another downside of a sole proprietorship is that it can be difficult to raise money for the business. Since only one person owns the business, they are the only one who can invest money into the business. This can make it difficult to get loans or other forms of financing from banks or other lenders.

Overall, a sole proprietorship has both advantages and disadvantages. Potential business owners need to weigh these factors carefully before deciding whether this type of business structure is right for them.

Partnership

A partnership business is a company owned and operated by two or more individuals. The partners in a partnership share the profits, losses, and management of the business. The overall balance of the partnership and cut in the profits is determined later on.

There are several advantages to starting and running a partnership business. Partnerships can pool resources and expertise, which results in a more successful business venture. Additionally, partnerships can provide tax benefits and help spread the risk of starting a new business. Finally, having multiple partners can provide valuable support and advice for the business.

Despite these advantages, there are also some challenges associated with partnership businesses. For instance, disagreements between partners can lead to tension and conflict within the company. Additionally, if one partner decides to leave the business, this can disrupt the operation of the company and potentially lead to financial problems. Suddenly, the remaining person needs to figure out the next steps on their own.

A partnership business can be a great way to start and grow a company. However, it is important to consider all the potential advantages and disadvantages before entering into a partnership agreement.

Limited Liability Company

A limited liability company (LLC) is a business structure that can combine the features of a corporation and a partnership. An LLC has the limited liability protection of a corporation and the flexibility of a partnership.

The main benefit of an LLC is that it protects owners from personal liability for the debts and actions of the LLC. This means that if the LLC owes money or gets sued, personal asset protection kicks in. Another benefit of an LLC is that it offers flexibility in how the business is structured and operated. For example, an LLC can be organized as a sole proprietorship, partnership, or corporation.

If you're considering starting a business, an LLC may be the right choice. It offers the limited liability protection of a corporation and the flexibility of a partnership. Contact a representative at Dorado Management Services to learn more about LLCs and the paperwork involved in creating an LLC.

Corporation

A picture of a person sitting by their laptop debating what business structure their business should be

A corporation is a business structure that offers many benefits to business owners, including limited liability, tax breaks, and increased funding opportunities. There are two main types of corporations: S-Corporations and C-Corporations.

S-Corporations offer pass-through taxation, meaning that the business itself is not taxed on its income. Instead, the owners become taxed on their personal income from the business.

C-Corporations are taxed as separate entities, meaning that the business pays taxes on its income before distributing profits to shareholders. Both types of corporations have their advantages and disadvantages, so it's essential to choose the right one for a business.

Making Sense of Business Structure with Dorado Management Services

One of the top things Dorado Management Services helps with is filling out and making sense of the paperwork needed when structuring a business. So many people go into business with a great idea but don’t know all the paperwork involved. It can be easy to forget to fill out some very important documents, so Dorado Management Services is there to help. They make sure nothing is missed.

It doesn’t take a ton of effort to craft a great business structure. Talking with a professional can make things so much clearer. For other business needs along the way, Dorado Management Services is right there as well.

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