Have you ever wondered what that "Inc." you see at the end of a company's name really means, or how that's different from the "LLC" you might find written after the name of some other company? Those ubiquitous strings of letters indicate how a business is structured. Whether it's a single mom-and-pop operation or a large-scale, national powerhouse, incorporating a business does a lot more than simply allowing someone to add "Inc." or "LLC" to the name of their business venture.
Selecting a business structure helps to determine how a business will operate and be taxed, and it takes other factors like liability into consideration. In order to choose the most suitable structure, a business owner must be aware of his or her own needs, as well as those of the business. This decision process isn't limited to just a few select individuals or organizations, either. In the year 2008 alone, nearly 30 million businesses were operating in the United States, most of which were small companies [source: U.S. Census Bureau]. At some point, the people behind each one of those enterprises had to assess their business and determine which type of structure worked best for them.
Suppose you come up with the latest, greatest idea for a business that you just know everyone will love. It's going to be the next Google! How do you begin to bring your idea to life? What are your options?
The first step in understanding how businesses can be set up comes with knowing that, even though they may all seem similar from the outside, not all businesses are structured identically. Even within the same industry, some owners might opt for one setup while another owner will decide that a different type of arrangement is more suitable. It all depends on the individual needs, preferences and requirements of the potential business and the business owner. This article will give you a glimpse of the types of businesses that exist and weigh the pluses and minuses of each structure. Then, we'll show you how a corporation can spring into existence. Before we look at corporations, though, we'll explore some of the more common types of businesses.