Most common ways to structure your business: advantages and disadvantages. Part Two

Below is a list of five of the most common business structures, along with some of the main advantages and disadvantages of each. This installment features the Professional Corporation, Nonprofit Corporation, Limited Liability Company, Professional Limited Liability Company and the Limited Liability Partnership.

Professional Corporation

Advantages

1. Owners have no personal liability for the negligence of other owners

Disadvantages

1. More expensive than a general partnership

2. Paperwork can be burdensome

3. All owners must be members of the same profession

Nonprofit Corporation

Advantages

1. Corporation does not pay income taxes

2. Contributions to charitable organizations are tax deductible

Disadvantages

1. Tax advantages only available to groups organized for charitable, scientific, educational, literary or religious purposes

Limited Liability Company (LLC)

Advantages

1. Owners have limited personal liability for business debts even if they participate in management

2. You can choose between being taxed as a partnership or a corporation

Disadvantages

1. More expensive to create than a partnership

Professional Limited Liability Company

Advantages

1. Same advantages as a regular limited liability company

2. Gives state licensed professionals a way to enjoy the benefits of an LLC

Disadvantages

1. Same as a regular LLC

2. All owners must be members of the same profession

Limited Liability Partnership

Advantages

1. Geared towards those in older professions such as law, medicine and accounting

2. Owners are not liable for professional negligence of other partners

3. Owners report their share of profit or loss on their own tax returns

Disadvantages

1. Owners remain liable for debts of other members if they fall outside the scope of the members personal practice i.e., landlord or creditor debts

2. Not available in all states

3. Limited number of professions may participate[1]

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[1] Fred S. Steingold, Legal Guide for Starting and Running a Small Business 5 (Betsy Simmons ed., Nolo 10th ed. 2008).