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What is the best type of business structure and why?

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Various Forms of Business and Selecting the Best One

This blog is going to be discussing one of the most foundational decisions – what is the best type of business structure should your business employ. Starting a new business is an involved process that entails several strategic decisions. There are issues to consider such as the number of employees, location, hours of operation, products and services, and more. Not sure what types of organizational structure there are? No problem, we’re here to help.

There are four main types of business structures:

 

·         Sole Proprietorships

      Owned in full by one person who is responsible for all decision-making. They can work independently (such as an independent contractor) or choose to hire employees. The sole proprietor assumes total liability for any debts that are incurred.

 

·     Partnerships

      Just like it sounds, a partnership is when two or more people decide to own a business together. There are three different types of partnerships with different structural implications. These are general partnership, limited partnership, and limited liability partnership. In a partnership, owners are personally liable in the same manner that a sole proprietor is.

 

·         Limited Liability Companies (LLC)

      having the characteristics of both a corporation and partnership, an LLC provides limited liability to owners. This is a popular business model since it has the most flexibility and offers the best of both worlds – ownership without responsibility to stockholders and protection from full personal liability should something go wrong.

 

·         Corporations

      A legal entity separate from those that formed it, a corporation has legal rights and specific laws that apply to it. This entity is controlled by stock – which is essentially how much of the company you own. Unlike a sole proprietorship or a partnership, if a corporation fails the owners/stockholders only risk losing their initial investment.

 

When deciding on the right business form, seek legal advice. There are several free resources for small businesses – such as the Small Business Administration  – that provide counseling, advice, and more. Do some research on your business industry and see what organizational structures have been working for your peers and competition.

 

General Liability Insurance

What Is General Liability Insurance? Commercial General Liability Insurance protects small-business owners from claims of injury, property damage, and negligence related to their business activities.

Workers’ Compensation

What Is Workers’ Compensation Insurance? Workers’ compensation insurance covers your employees’ medical expenses and at least some portion of their lost wages if they are injured on the job.

Business Owners Policy

What Is a Business Owners Policy? A BOP is simply bundled insurance designed to provide essential coverage to certain business owners at a competitive price. A BOP insurance coverage includes

Professional Liability Insurance

Professional liability insurance also called , errors and omissions insurance (E&O; insurance), protects you if a client claims that your services caused them to suffer a financial loss. While general liability insurance is primarily focused on property damage or bodily injury,

Disability Benefits Insurance

Employers in New York State are obligated to offer disability benefits insurance to their employees. This coverage is specifically designed to provide financial assistance in the event of off-the-job injuries or illnesses.



Business Umbrella Insurance

Without Business Umbrella Insurance (also sometimes called Umbrella Liability Insurance or Excess Liability Insurance ), you would have to pay the uncovered expenses out-of-pocket. Even if you carry General Liability Insurance for your business, without business umbrellainsurance you might face a repair, settlement, or judgment in excess of your coverage limit.

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