sole proprietorship, named sole trader in UK, is a business structure where the owner is fully liable for all the assets and debits of the business. In a sole proprietorship, all you really need to do is begin working. You don’t need to file any particular paperwork, just the usual licenses and permits that any other business needs to file. You are the chief cook and bottle washer and the sole responsibility for the success or failure of the business is in your hands. However, you are also personally responsible for paying business debts and income taxes. It can be a dangerous proposition, because if your business loses a lawsuit, doesn’t pay for goods or services or incurs other unpaid debt, you can lose your personal savings and possessions, including your house.
A C-Corporation, also known as a regular corporation, on the other hand is a business structure that is legally independent from its owners. There is no personal tax liability for its owners and it has a board of directors and shareholders. It is somewhat more complicated to set up than other business structures because it is established with your state’s authorities and must follow all the laws for corporations in that state.
There are many tax advantages to forming a C-Corp, including the fact that all income is taxed at the corporate rate before it is distributed to shareholders and owners. Your C-Corp is eligible for many tax deductions, including salaries, rents, repairs and maintenance, profit sharing and benefits plans.
A partnership is a type of business entity in which partners (owners) share with each other the profits or losses of the business undertaking in which all have invested. However, depending on the partnership structure and the jurisdiction in which it operates, owners of a partnership may be exposed to greater personal liability than they would as shareholders of a corporation.
Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of his investment in that company.