What's the right business entity for your small business?

Written by Jocelyn Johnson, MSN, CDN, LDN

Deciding to start a small business is a big deal. The first step is to know the services or products you want to offer your customer base. The second step is to sort out the type of business structure or entity can be confusing. Here are descriptions of the types of business entities you can decide.

Types of business entities:

Sole-proprietorship (solopreneur):

This is a business wholly owned by one person with unlimited liability, meaning if this business has any type of conflict, the owner will take on all the risk of the business. You are not protected in lawsuits and can lose all your assets.

Limited Liability Company (LLC):

The Limited Liability Company (LLC) is a business entity that offers limited legal protection for owners, also known as members of the business. There are no limits to the number of members an LLC can have; the Commonwealth of Virginia allows for an individual or "single member" LLC.

Limited Liability Partnership (LLP):

The Limited Liability Partnership is similar to an LLC business type, except that this business entity is liable for all debts and obligations, yet the partners are not personally liable.

Non-profit organization:

The Non-profit Organization (NPO) is a business that works to further social causes or advocacy for groups such as the underprivileged, the disabled, the homeless, or children; religious groups are able to claim tax-exemption status under the IRS. This type of business is granted tax-exempt status with the IRS. Charitable donations fund these types of companies for the betterment of their cause and to pay for day-to-day operations.

Corporation:

A corporation is a business entity created by individuals or a group of shareholders with the intent of operating for a profit.

- C Corporation (C Corp):

A C-corporation is a business entity owned by a group of shareholders. These shareholders have a board of directors (BOD) that helps to guide the business by appointing a management team, such as the CEO (Chief Executive Officer), CFO (Chief Financial Officer), and President of the company.

- Small Business Corporation (S Corp):

An S-corporation is a business entity under the Subchapter S by the IRS. This type of business is considered a small business corporation that has the protection of an LLC with a corporate-level status.

Position within a business or company:

- Owner:

A person that owns and operates a business

- CEO (Chief Executive Officer):

This senior executive is the highest-ranking executive manager of a corporation; this individual guides the company to financial success.

- CFO (Chief Financial Officer):

This is a senior executive responsible for managing a corporation's financial actions.

-CIO (Cheif Information Officer)

-CMO (Chief Information Marketing)

-COO (Chief Operating Officer)