The most common types of business units include sole proprietorships, partnerships, limited liability companies, corporations and cooperatives. To learn more about each type of legal structure, click here. The legal form in which a company operates is an important decision that has implications for how a company structures its resources and assets. Several legal forms are available to entrepreneurs. Each includes a different approach to managing profit and loss (Figure 9.24 “Business Forms”). While small businesses may be LLCs, some large companies choose this legal structure. An example of LLC is Anheuser-Busch Companies, one of the leaders in the beer industry in the United States. Based in St. Louis, Missouri, Anheuser-Busch is a wholly owned subsidiary of Anheuser-Busch InBev, a multinational brewery based in Leuven, Belgium.
In addition to legally registering your business unit, you may need certain licenses and permits to operate. Depending on the nature of the business and its activities, it may be necessary to obtain a license at the local, state, and state levels. A cooperative (also known as a cooperative) is a business that is owned and controlled by those who use its services. Individuals and businesses owned by the cooperative join forces to market products, purchase supplies and provide services to their members. When well managed, cooperatives increase the profits of their producing members and reduce costs for their consumer members. Cooperatives are quite common in the farming community. For example, about 750 cranberry and grapefruit growers market their cranberry sauce, fruit juices and dried cranberries through the Ocean Spray Cooperative.  More than three hundred thousand farmers buy the products they need for production – animal feed, seeds, fertilizers, agricultural supplies, fuel – through the Southern States Cooperative.  Cooperatives also exist outside agriculture. For example, MEC (Mountain Equipment Co-op), which sells high-quality outdoor equipment, has more than 5 million members across the country, each paying $5 for their lifetime membership.
The company shares its financial success with its members and also returns 1% of its turnover to maintain the stake in nature. Taxation: An LLC is considered an “intermediary entity” for tax purposes. This means that business income is transferred through the corporation to LLC members who report their share of profits or losses on their personal income tax returns. LLC is only required to file an informative tax return that resembles the character of the partnership. Single-person CLLs are permitted to report their business expenses on Form 1040, Schedule c, e or f. LLCs with more than one member typically file a 1065 Partnership Form. The law considers a corporation to be a separate entity from its owners. It has its own legal rights, regardless of its owners – it can sue, be sued, own and sell property, and sell the property rights in the form of shares.
Business application fees vary by state and tax category. For example, in New York, the fee for the S Corporation and the C Corporation is $130, while the fee for non-profit organizations is $75. A type of business entity owned and managed by a person – there is no legal distinction between the owner and the business. Sole proprietorships are the most common legal form for small businesses. It is the simplest form of business unit. In a sole proprietorship, a person is responsible for all profits and debts of a business. A specialized type of corporation called S-Corporation, a special type of corporation in which the corporation`s profits and losses are reported on the owners` personal tax returns in proportion to each owner`s share in the corporation. avoids double taxation. Like a partnership, the profits and losses of the business are reported on the owners` personal tax returns in proportion to each owner`s share in the corporation. Although this is an attractive feature, an S company would not be practical for most large companies, since the number of shareholders of an S company is usually limited to a hundred.
In contrast, Southwest Airlines has more than ten thousand shareholders. For small businesses, such as many real estate agencies, S Corporation is an attractive form of business. “In December 2015, there were 1.17 million business users in Canada, as shown in Table 1.1-1. Of these, 1.14 million (97.9%) were small businesses, 21,415 (1.8%) were medium-sized businesses and 2,933 (0.3%) were large. (Industry Canada) Taxation: A sole proprietorship has direct taxation. The company itself does not file a tax return. Instead, the income (or loss) passes and is reported on the owner`s personal income tax return using a Schedule C (Form 1040). Here is a short video that provides a simple and straightforward summary of the key points of any form of commercial property. An example of this type of business is Google. In 1995, co-founders Larry Page and Sergey Brin created a small search engine and made it the world`s first search engine. The co-founders first met at Stanford University while pursuing their doctoral dissertation, then left to develop a beta version of their search engine.
Soon after, they raised $1 million in funding from investors, and Google began receiving thousands of visitors a day. With a combined 16% stake from Google, they have a total net worth of nearly $46 billion. “Limited liability companies were created to provide business owners with the liability protection that businesses enjoy, while profits and losses are passed on to owners as income in their personal tax returns,” said Brian Cairns, CEO of ProStrategix Consulting.