Business Structures in the United States - Part 2
Limited Partnership
A limited partnership provides limited liabilities for the partners who own the business. At least one partner is the ‘general partner’ and acts as the controlling partner for the business. The liability of the limited partners is limited to the amount that they invest in the company.
- Because there is more than one owner, all decisions do not rest on one person’s shoulders
- Limited partners can leave the business or be replaced without dissolving the entire business
- More filings, forms, and state requirements than a sole proprietorship
- General partners are personally liable and responsible for all debts and obligations
Limited Liability Corporation (LLC)
A limited liability corporation, or a LLC, is similar to a corporation, but it is taxed differently. Owners are required to write an operating agreement, which outlines the affairs and conduct of the business. This type of organization must file paperwork with the state.
- No double taxation of profits
- More flexibility with fewer restrictions than a corporation
- More protection for owner’s than with a partnership or sole proprietorship
- Earnings from the LLC are subject to self-employment taxes, which can be higher than regular income taxes
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