There are four main types of business structures: corporation, public limited company, limited liability company (LLC), and C-Corporation. Each structure has its advantages and disadvantages, and it’s important to choose the right one as it determines how the company is taxed. The LLC is the most dominant structure in Latin America and Europe, while the General Corporation is the most common in the US.
There are four main types of business structures that companies can organize themselves as: a corporation, public limited company, public limited company, or limited liability company (LLC). The structure that a business chooses to build itself determines how the company is taxed financially from any profits it earns, making it very important to carefully choose the right type. A lot of time and research is needed to choose the right type of structure to follow. The General Corporation is the most common corporate structure that companies follow, but like all others, it also has its advantages and disadvantages.
When a company incorporates as a public company, the shareholders are the owners. There are no limits to the number of shareholders who can invest in a public company and investors are not liable to any creditor. The personal liability of any shareholder is, in most cases, limited to the amount initially invested in the company. Companies that participate in this type of structure are subject to more state and federal regulations than other types of companies, and this type is also more expensive to form. Some of the most beneficial aspects of setting up general corporations are the tax-free benefits and the ease of raising capital.
The “classic corporate structure” is called C-Corporation. While these types of corporate structures are similar to general corporations, there are significant differences. A C-Corporation must have a director who offers to sell shares to all existing investors before putting them up for sale to new ones. In the United States, not all states recognize this type of structure, but those that do limit the number of shareholders from 30 to 50.
An S-Corporation, also referred to as a small corporation, is mostly found in smaller businesses. No more than 75 shareholders can take part in this type of company and they have to decide on a single type of stock to sell. All investors must include the profits or losses they incur in this type of company in their personal income, but this allows them not to be subject to double taxation. Shareholders must also hold annual meetings where every shareholder is present. Many small businesses prefer to organize as an S-Corporation because limited liability protection is in place and taxable profits are reduced if the business owner decides to sell the corporation.
In Latin America and Europe, of all corporate structures, the LLC is the most dominant. This type of organization allows owners to protect their personal assets from any commercial debt. Many businesses prefer to organize themselves under the corporate structures of the LLC because they have a great deal of flexibility when it comes to the management of the business. There are many foreign investors who prefer this type of property because there are no ownership restrictions.
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