Choosing the Structure of Your Business or Organization
You may operate your business or organization
under any one of several organizational structures. Each type of
structure has certain advantages and disadvantages that should be
A Sole Proprietorship is one individual or married couple
in business alone. Sole proprietorships are the most common form
of business structure. This type of business is simple to form and
operate, and may enjoy greater flexibility of management and fewer
legal controls. However, the business owner is personally liable
for all debts incurred by the business.
A General Partnership is composed of two or more persons
(usually not a married couple) who agree to contribute money, labor,
an/or skill to a business. Each partner shares the profits, losses,
and management of the business, and each partner is personally and
equally liable for debts of the partnership. Formal terms of the
partnership are usually contained in a written partnership agreement.
A Limited Partnership is composed of one or more general
partners and one or more limited partners. The general partners
manage the business and share full in its profits and losses. Limited
partners share in the profits of the business, but their losses
are limited to the extent of their investment. Limited partners
are usually not involved in the day-to-day operations of the business.
A Limited Liability Partnership is similar to a General
Partnership except that normally a partner does not have personal
liability for the negligence of another partner. This business structure
is used most commonly by professionals such as accountants and lawyers.
A Corporation C Corp or Subshapet S) is a more complex business
structure. As a chartered legal entity, a corporation has certain
rights, privileges, and liabilities beyond those of an individual.
Doing business as a corporation may yield tax or financial benefits,
but these can be offset by other considerations, such as increased
licensing fees or decreased personal control. Corporations may be
formed for profit or nonprofit purposes. For more info see our Massachusetts
The Limited Liability Company (LLC) and the Limited Liability
Partnership (LLP) are the newest forms of business structure in
Massachusetts. An LLC or LLP is formed by one or more individuals
or entities through a special written agreement. The agreement details
the organization of the LLC or LLP, including: provisions for management,
assignability of interests, and distribution of profits or losses.
Limited liability companies and limited liability partnerships are
permitted to engage in any lawful, for profit business or activity
other than banking or insurance. As of March 2003, Massachusetts
became the fiftieth state to allow single member LLC's.