Special Business Structures
In addition to sole proprietorships, LLCs and S-Corp’s, entrepreneurs and professionals also have the option of setting up shop under certain special business structures, available in certain states, and suitable for certain professions and business areas.
Limited Liability Partnership (LLP): A limited liability partnership provides protection for individual partners from the business liabilities of other partners or employees not under their direct supervision. Many states will not recognize, or allow, an LLP to be set up, and you should check with your state business registration agency for further clarifications.
Under an LLP, individual partners report earnings, losses and expenses on their respective personal tax returns. This kind of business structure is suitable for professionals such as medical practitioners and lawyers, where each partner has his own clients, but they all share the same facilities, staff, office space and work under the same group.
Professional Service Corporation (PS): A PS is a refined and specific version of an LLP, in that it affords limited liability protection solely to licensed professionals from the actions and liabilities of other shareholders. Again, please refer to your state business registration authority for clarification regarding state recognition of a Professional Service Corporation, and the professions which qualify.
Limited Partnership (LP): A limited partnership is closer to a fully incorporated company, at least in so far as reporting requirements are concerned. LPs require extensive paperwork and strict division of labor requirements, with at least one partner who is fully responsible for the operations and business obligations. Other partners are afforded liability protection on amounts exceeding their individual investments. Although an LP is required to file a business tax return for informational purposes, partners show their earnings and losses on personal tax returns.
Non-Profit Corporations: Non-profits are generally setup for charitable giving, providing community services such as health care, or religious organizations which need to collect donations. Non-profit corporations are tax exempt (subject to state and IRS approval) and provide limited personal liability to the board of directors or designated trustees. Procedures for setting up non-profits and the subsequent reporting requirements may differ from state to state.