Types of Businesses: Which One is Right for You?

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A corporation (also known as a company) is an independent legal entity that has been created by state law, other than a trust. A corporation may be either privately or publicly held.

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The owners, who are known as shareholders, own stock and have limited liability. This means they can only lose the amount they invest in the company. Shareholders elect directors who manage the company on their behalf and establish a set of corporate bylaws that govern how the corporation operates.

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Limited Liability Company (LLC)

A Limited Liability Company is a type of business that has the ability to divide liability risks among its owners. An LLC is a hybrid entity, combining the pass-through taxation benefits of a partnership or sole proprietorship with the limited liability protection of a corporation.

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In most states, an LLC may be formed by filing articles of organization with the Secretary of State or other designated official and paying an initial set up fee.

An LLC may be operated under any trade name, subject to any restrictions imposed by state law. In order to maintain your limited liability status as an LLC owner, you must file all required tax returns and keep adequate financial records documenting your income and expenses.