Founder Entities

1. Sole Proprietorship - This is the most common form of small business ownership in the United States. It offers the sole proprietor flexibility and is created automatically.
   
   1. Liability: A sole proprietorship is not a separate legal entity from the individual who runs it. This means any business assets and liabilities are not separate from personal assets and liabilities.
   2. Taxation: A sole proprietorship benefits from pass-through income and different tax deductions.
   3. Investment Opportunities: It can be harder to raise capital due to a lack of legitimacy, and the inability to sell equity in a sole proprietorship. Sole proprietorships can be a good option for those looking to test their business and product before pursuing a more formal business structure.
2. Partnership - Different forms of partnership include General Partnerships (GPs), Limited Partnerships (LPs), and Limited Liability Partnerships (LLPs). LLPs are typically only available for certain occupations (i.e. attorneys, accountants, doctors). 
   1. Liability: In a GP, all partners share unlimited liability, meaning they are personally liable for the partnership. In a LP, there may be one or more partners with unlimited liability, while all other partners have limited liability which is limited to their capital contribution.
   2. Taxation: All forms of partnerships benefit from pass-through tax treatment.
   3. Investment Opportunities: 
3. LLC - These are entities the employ the benefits of partnerships and corporations into one entity.
   1. Liability: Personal assets are typically not at risk in LLCs because of limited liability.
   2. Taxation: You are allowed to elect for different taxation structures. The benefit is one of those elections can allow the LLC to be taxed as a pass-through entity.
   3. Investment Opportunities: Some funds may be unable to invest in LLCs. Although LLC interest may be more difficult to sell/transfer than stock in a corporation, it is possible.
4. Corporation - Different forms of corporations are Professional Corporations, S Corporations, and C Corporations. Professional Corporations are similar to LLPs (mentioned above), as they are limited to entrepreneurs who provide professional services. 
   1. Liability: All of these different forms of corporations offer strong protection from personal liability. The cost, however, is that corporations require more extensive operational processes (i.e. record keeping, reporting, etc.).
   2. Taxation: S Corps operate as a normal corporation but can be taxed as a pass-through entity. The requirements for an S Corp are: ≥100 shareholders, all shareholders must be individuals, all shareholders must be US citizens, and there may only be one class of stock. All other corporations pay income tax on their profits. In some cases, profits are taxed twice – once at profit, and again when dividends are paid to shareholders on their personal tax returns.
   3. Investment Opportunities: Corporations are popular amongst investors because they can raise funds through the sale of stock. This is also a benefit in attracting employees. Corporations can have multiple classes of stock when can be attractive to investors. It is an entity well understood by investors, employees, and courts.

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