Ownership Options and Legal Structures for Small Business Owners in Hazelwood

As we continue our series on , we're back this week with a discussion on different types of business ownership options and tips on how to determine the legal structure of your business. We'll continue the discussion next week in Part 2, where we'll get expert advice.

In case you’ve missed previous editions of our small business series, we have shared ideas for choosing a business concept, including the and . We’ve also discussed and given tips and ideas on ways to find .

FranNet owner Chris Coleman is back this week sharing tips from both his personal experience and his clients’ experiences. David Cox, the City of Hazelwood’s economic developer, also returns to weighs in briefly. Joining them this week is .

Different Types of Business Ownership

Shoaf said there are several kinds of business ownership you should consider when opening your business in Hazelwood.

• Sole Owner—A single individual owns and operates a business. It’s the simplest form of organization, but also carries certain risks. While the owner gets to enjoy all profits, he must also endure all losses from the business—meaning a creditor could in theory collect on debts owed even from the owner’s personal property.
• General Partnership—Similar to sole ownership, a partnership is a business operated by two or more people with shared profit and management. Partners may also be personally liable for business expenses and legal concerns.
• Limited Partnership—Most popular in the 70s and 80s (prior to the invention of LLCs), a limited partnership means that one partner runs the business and assumes liability for operations, while another may invest money but not participate in regular operations of the business. The “limited” partner may also have limited liability. The LP exists and files taxes as a separate entity, and limited partners only become liable as a general partner if they take control of the business—but if a limited partner is a member of the board of directors, he or she is not considered to be controlling the business.
• Limited Liability Partnership (LLP)—A relatively new idea, some or all of the partners involved have limited liability, and one partner isn’t responsible or liable for the actions of the other. An LLP operates a lot like a limited partnership, except that partners’ personal assets can’t be liquidated, outside of the amount invested into the company.
• Limited Liability Company (LLC)—A very popular option for many small business owners, those who invest in the company form a corporate structure. Shareholders then have limited liability when it comes to the company’s actions and finances. An LLC is sort of a hybrid between a corporation and a partnership.   
• Corporation—Owners form a legal entity that is separate from themselves. The entity, or corporation, then has many of the same rights and responsibilities of an individual—it can enter into contracts, borrow or loan money, hire employees, be sued (and sue), own assets and pay taxes. Shareholders also have limited liability—so they can get profits through dividends and stock, but they can’t be held personally liable for any debts owned by the corporation.  
• Trust—Also called a common-law trust, this is an unincorporated business organizational structure that is created by a legal declaration of trust. It’s used in place of partnerships or a corporation, and differs from a corporation because it doesn’t have the rights of an individual. Trustees will have the legal title to any business assets, which are also transferrable. However, a business trust is considered a corporation for tax purposes.
• Association—A business organization that works to promote the interests of its shareholders/members.  Companies may associate in order to save money and time on certain business requirements, such as research, industry standards and more.

Have you always dreamed of starting your own business? Subscribe to our daily newsletter so you won’t miss a single part of this ongoing series! Next week, we’ll share tips and resources for finding free and low-cost classes and business training for business owners.

Do you own your own business in Hazelwood? We want to share your story with the community! Contact Patch reporter Angela Atkinson at angela.atkinson@patch.com to arrange for an interview.