Knowing what type of business a person is or was involved can provide valuable information. Business records can produce information on business contacts, business locations, start date, end date, and much more. One interesting piece of information available to uncover through business records is the actual business type. The type of business a company is operating as can tell you a lot about how the business is taxed, how many people could be involved, and liability responsibility.
The most common types of business structures include Sole Proprietorship, Limited Liability Company, Partnership, and Corporation.
Sole Proprietorship: In a sole proprietorship there is only one owner of the business, or a married couple can operate as a single owner. The Sole Proprietor can hire employees but he/she is the only one responsible for the business. The sole owner has full responsibility for all taxes, debts, and liabilities. For example, if a Sole Proprietor owns a shop and someone is injured on the premises, not only could the business be liable to pay for injuries, but the Sole Proprietor is also personally liable. For tax purposes, a Sole Proprietor can claim profits and losses on their personal tax returns.
Limited Liability Company: The Limited Liability Company, or LLC for short, is the most common type of business structure for small businesses. An LLC can have one or more owners, called members, who are responsible for the company. An LLC can either be managed by its members, or the members can appointment managers. In an LLC, the members have the option of claiming profits and losses on their personal income tax returns just as a sole proprietorship (called pass-through taxation), or they can choose to be taxed as a partnership. However, unlike a sole proprietorship, in an LLC, the members are not personally responsible for the business debts and liabilities. The responsibility stays strictly within the business.
Partnership: A Partnership is a business structure that contains two or more people and is formed by creating an agreement between them. There are three types of Partnerships: General Partnerships, Limited Partnerships, and Limited Liability Partnerships. In a General Partnership, profits and losses are shared equally between the partners, although the agreement can describe the exact structure. Each partner is fully responsible for all debts and liabilities of the business. A single partner can act on behalf of the entire partnership, thereby also making every partner personally liable. Largely because of the liability responsibility of each partner, General Partnerships have become less popular in recent years. However, through Limited Liability Partnerships, while each partner has management rights, their liability is limited to the value of their investment in the business, and they are not personally liable. A Limited Partnership the limited partner has no management control, is liable only to the extent of their investment, and they are paid a return on their investment based on the business profits and losses. In all other aspects, and Limited Liability Partnership operates as General Partnership. A Partnership is not taxed, but the income flows directly to the partners, who must identify this on their personal tax returns.
Corporations: A Corporation is a much more complicated business structure. It operates as a separate entity from its owners. The owners of a Corporation are stockholders. Although the stockholders are owners, the Corporation is only managed by the Board of Directors. Stockholders are not personally responsible for the debts and liabilities of the Corporation. Also, the owners of a corporation are essential taxed twice, because the Corporation is taxed and the dividends distributed to the stockholders are also taxed. There is an alternative corporation structure called an S Corporation in which there is no double taxation. Instead, income flows to the shareholders, who will claim it on their personal tax returns.
To find online resources about and access to business records, visit The Free Public Records Directory. There you will find links to online business records and/or contact information of agencies where this information is readily available.