Question

Many of us have thought about starting our own business. If you started a business, what business formation would you use: sole proprietorship, partnership, LLC, corporation, etc.? Why?   

I personally would like to work with a nonprofit business can you provide me a scenario of a nonprofit using the above please

Answer 1

What type of business to choose doesn't only mean what kind of products to sell or service provided, but what the legal form business is going to be!

A legal form which provides liability for the company's owners without requiring incorporation- LLCs (Limited Liability Company) is one such choice.Personal liability protection for all owners and pass through profits without corporate taxes, profits can be distributed unequally -- a 60% shareholder can take only 10% of the profits. This allows more flexibility for tax planning and for rewarding owners who bear more management responsibilities.But LLC laws vary by state.

The use of an LLC is extremely rare; all nonprofit LLC members must be recognized 501(c)(3) organizations, not people or other entity types.

However, the most popular business entity for nonprofits is the nonprofit corporation. This type of corporation is different from a typical for-profit corporation or S-Corporation. Those have shareholders (owners). A nonprofit corporation has no owners whatsoever, only stakeholders. A stakeholder is not an owner, but rather someone who has a stake in the successful operation of the organization. Stakeholders could be members of the nonprofit, or even beneficiaries of the nonprofit’s activities. One thing stakeholders have in common: they have no legal ability to profit personally…hence, nonprofit. A nonprofit corporation is formed to carry out a public purpose, whether that be religious, educational, charitable, scientific or whatever.  It is prohibited from acting in a manner that results in private inurement (profit) to individuals.

The nonprofit organization is not “owned” by the person or persons that started it. It is a public organization that belongs to the public at-large. The parties responsible to operate the organization for the stakeholders are the members of the board of directors.