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Home
 Welcome | Step One: Getting Started | Step Two: Operating a Business | Step Three: Business Plan |
Step Two: The Different Types of Business OwnershipThere are four different types of business ownership: The Different Types of Business Ownership Sole Proprietorship
To find out more about name registration for your sole proprietorship, please contact the Business Licensing Information Center. You may also be required to obtain a business license or city privilege license. For more information about this license, contact your local city or town hall. Refer to the Business Requirements section for more information about requirements related to starting your business. For additional information on starting a sole proprietorship:
Partnership
There are two main types of partnerships: General and Limited General Partnership
The biggest disadvantage to a General Partnership is that each partner is liable for the whole business. You are also responsible for any poor business decisions Joe may have made. Compare it to a marriage. If your spouse buys a house in an unsafe neighborhood while you are away on business, you are just as responsible for the house payments as your spouse is, even though it wasn't your decision to buy the house. Limited PartnershipA Limited Partnership is similar to the general partnership, with several major exceptions. There are two actual classes of partners that make up the partnership: General Partners and Limited Partners. General Partners have the same pros and cons as in a general partnership above; however, each Limited Partner in a limited partnership is only liable to the extent of his or her individual investment. Limited Partners have no say in the day-to-day operations of the company; the General Partners actually manage the company. In essence, a limited partner is an investor. In the case of the Water Works example above, a limited partner's loss would only amount to the investment made in the company. The company might fold due to one of the general partner's poor decisions, but a limited partner would not have to bear financial losses above what was initially invested in the business. However, general partners (those that manage day-to-day operations) may have the same liabilities as under a general partnership. A limited partnership is a bit more complicated (and expensive) to start than a general partnership. In addition to registering your trade name to protect it, you must file a Certificate of Limited Partnership with the NC Secretary of State's office. For additional information on business partnerships: Corporations
Forming a corporation is somewhat complicated, and you may want to enlist the assistance of an attorney if you choose to organize your business this way. To form a corporation requires filing Articles of Incorporation and paying filing fees. For information about forming a corporation in North Carolina, you can download an instruction booklet from the Secretary of State's office. The Department of the Secretary of the State also had copies of the Articles of Incorporation form that you can download. In addition, a corporation, once formed, must comply with several formalities, such as holding regular meetings and maintaining explicit records. There are several different types of corporations:
For more information on corporations, consult: Department of the Secretary of State, Corporations Division Additional web sites offering information on corporations: http://www.secretary.state.nc.us/Corporations/ThePage.aspx Limited LiabilityA Limited Liability Company (LLC) is not a corporation. It is a distinct form of business ownership that combines features of the corporation with features of the partnership or sole proprietorship. Forming an LLC is similar to forming a corporation. Articles of organization must be prepared and filed and fees must be paid. You may wish to consult an attorney if you choose to form an LLC. An LLC is like a corporation in that it provides liability protection for its owners. It is like a sole proprietorship, partnership or S Corporation in that it protects its owners from double taxation: profits are accounted for on the individual owner(s)' income tax returns. The LLC owners may choose to operate the LLC like a corporation, and elect managers to run it, or they may choose to operate like a partnership and manage the company themselves. A single person may also operate an LLC.
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A sole proprietorship is a business that is owned and operated by an individual. The owner is personally and legally responsible for his or her actions, including any actions taken on behalf of or in the name of the business. All profit or loss from a sole proprietorship belongs to the owner. This type of business organization is relatively simple to form and operate. No formal action is required by law to establish a sole proprietorship; however, proper name registration and certain permits and licenses may be required. 
A business partnership is created when two or more persons agree, in person or in writing, to start a business. To form a partnership in most North Carolina localities, you will simply need to register your trade name with the 
A general partnership is the easiest type of partnership to form. One additional step which you may wish to take if forming a general partnership is preparing and signing a partnership agreement. Partnership forms should be prepared by your attorney. For your convenience, a sample of a partnership form is included with this CD and may be accessed by clicking here. 
A corporation is a legal entity that is separate from the people who own it. Shareholders govern the corporation indirectly by electing people to manage it. 