OWNERSHIP STRUCTURES (CONTINUED)
Sole Proprietorship
A business that is owned by a single individual
ADVANTAGES
• Easiest and least expensive to set up
• Full control over all business decisions
• Minimal legal restrictions or requirements
• Owns all profits and reaps all benefits
• Not required to pay unemployment taxes
DISADVANTAGES
• Personally liable for all business transactions
• May have difficulty obtaining long-term financing
• No unemployment benefits if the business fails
• Limited tax savings
Limited Liability Company (LLC)
A hybrid business that draws advantageous characteristics
from both corporations and partnerships
ADVANTAGES
• Profits and losses pass through the company to its
owners for tax purposes
• Personal assets are protected from business liability
• No limitation on the number or nature of owners
• Easier to operate than a corporation
• Not subject to corporate formalities
• Owners may participate in management of the business
DISADVANTAGES
• Legal assistance is needed to properly set up
and structure
• Professionals—such as lawyers, accountants, and
doctors—are prohibited from registering as an LLC
Nonprofit
An organization that has no owners, gives no income
(except salaries/expenses) to members, directors or
officers, and must have a Board of Directors
ADVANTAGES
• Tax exemption
• Business operation flexibility
DISADVANTAGES
• Merger limitations
DC DOING BUSINESS GUIDE 2018/2019 21
Benefit Corporation (B Corps)
A type of for-profit company that operates as a General
Corporation, but adheres to third-party social and
environmental benefit standards
ADVANTAGES:
• Implementation of best environmental and social
policies to your business
• Indicates real promotion of real social change to
your costumers
• Conduit between investors and businesses
• Free Global Impact investment rating
• Flexibility in fundraising and profit structure
DISADVANTAGES:
• Recently introduced so more assistance is needed for
set-up compared to other structure
Cooperative Association
(General Cooperative Association or Limited
Cooperative Association)
A cooperative is a business or organization owned by and
operated for the benefit of those using its services. Profits
and earnings generated by the cooperative are distributed
among the members, also known as user-owners.
ADVANTAGES:
• Less Taxation
• Funding Opportunities
• Reduce Costs and Improve Products and Services
• Perpetual Existence
• Democratic Organization
DISADVANTAGES:
• Obtaining Capital through Investors
• Lack of Membership and Participation
QUESTIONS?
Contact the DC Bar Pro Bono Center for small business
legal assistance.
DC Bar Pro Bono Center
901 4th Street NW, Washington, DC 20001
dcbar.org · (202)737-4700
/dcbar.org