While there are many different business organization structures you may choose for your business, this guide will focus primarily on the five most common types used in Oregon - Sole Proprietor, General Partnership, Limited Liability Company, Business Corporation, and Nonprofit Corporation.
Ownership, liability, management control, and taxation are just a few of the primary considerations when selecting a business organization structure. Each type has its own advantages and disadvantages. If you have questions on which form is best for your particular situation, please consider consulting:
- An attorney;
- A certified public accountant;
- One of Oregon’s Small Business Development Centers;
- If business is in a regulated industry, contact the appropriate State licensing or regulatory agency.
| |
Sole Proprietor |
General Partnership |
Limited Liability Company |
Business Corporation |
Nonprofit Corporation |
| Registration |
No, except for Assumed Business Name |
No, except for Assumed Business Name |
Yes, File Articles of Organization & Annual Reports |
Yes, File Articles of Incorporation & Annual Reports |
Yes, File Articles of Incorporation & Annual Reports |
| Governing Document |
Business Plan Recommended |
Partnership Agreement |
Operating Agreement |
Bylaws |
Bylaws |
| Ownership |
1 Owner |
2+ Partners (Owners) |
1+ Members (Owners) |
1+ Shareholders (Owners) |
No Owners, Assets must be given to another nonprofit upon dissolution |
| Liability |
Unlimited personal liability for debts of the business and yourself |
Unlimited personal liability for debts of the business including your partners' actions |
Members (owners) have limited liability for debts of the LLC |
Shareholder liability limited to loss of their paid-in investment |
Operators are not personally liable for debts of the business |
| Management Control |
Owner makes decisions |
Partner control and decision making responsibility defined in partnership agreement |
Member managed or owners may appoint a manager per the Articles of Organization |
Shareholders elect directors to oversee policies and appoint officers |
May have members who may elect directors
Must have directors to oversee policies and appoint offic ers |
| Taxation |
Owner reports and pays taxes on personal tax return |
Each partner reports and pays share of taxes on personal tax return |
Choose to be taxed as a partnership or a corporation for income |
Corporation pays taxes on income
Shareholders pay taxes on dividends |
Nonprofit pays taxes on income unless tax exempt |
One of the primary considerations in selecting an organizational structure for a business is protection of a business owner from liability. Other considerations are the transferability of ownership rights, the ability to continue as a business in the event of the death or withdrawal of one or more of the owners, the capital needs of the business, and tax liabilities.