Choosing a type of structure for your business is one of the most important decisions you will ever make as a business owner. There are several business structures that people consider when starting a business, including sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.
Sole proprietorships
One of the most common business structures that business owners in Alaska choose to utilize is the sole proprietorship. The sole proprietorship allows for easy formation and a quick guaranteed ownership. It also gives the owner complete control, as the entity is considered one in the same with the individual.
However, this can be problematic if the entity fails, as the business’ failure will often lead to the owner having to cover the business’ debts by giving up their personal possessions to creditors.
Partnerships
A general partnership is like a sole proprietorship, except for the fact that it is typically run by two or more individuals. Therefore, general partners are generally liable for the debts of the partnership.
A limited partnership allows for both general partners, who handle the day-to-day business matters, and limited partners, who are mainly investors and are therefore not personally liable for the debts of the business.
LLCs and corporations
Business law experts often advise individuals starting a business to start an LLC or corporation, depending on the circumstances. Unlike sole proprietorships and partnerships, LLCs and corporations protect owners from personal liability.
The management structure of an LLC is often much more flexible than the management structure for a corporation. LLCs are often run by their members, while corporations must be run by a board of directors. LLCs can also choose pass-through taxation, whereas corporations are often subjected to double taxation.
Starting the business
Starting a business can be an exceptionally difficult endeavor, particularly if you do not have the right business structure. Researching your options carefully and choosing the best business structure for your needs can help you start out on the right foot.