How to open a company in America

How to Start a Business in America - Part 2

Last Updated: September 10, 2023By Tags: ,

Knowing business structures and knowing how to differentiate them is a competitive advantage right from the start.

In the previous edition we talked about the first elements you need to consider when deciding to open a company in the United States. Continuing the subject, In this edition we will focus on the two simplest business structures, highlighting the advantages and disadvantages of each of them. You will know the difference between an Individual Company (Sole Proprietorship) and Partnerships (Partnerships).

Sole Proprietorship

Sole Proprietorship

A sole proprietorship is the simplest and most common structure chosen to start a business.. It is an unincorporated company owned and managed by an individual, without distinction between the company and the owner.

As a sole proprietorship, the entrepreneur is entitled to all profits and is responsible for all debts, company losses and commitments.

An individual is automatically considered a sole proprietorship if they carry out commercial activities, but do not register like any other type of business. Sole proprietorships do not produce a separate business entity. This means that the company's assets and liabilities are not separate from its. Sole proprietors can register a business name.

For low-risk businesses or owners, who want to test their business ideas before even establishing a formal company, an individual company could be a good business. A sole proprietor is someone who owns an unincorporated business on their own. However, if you are the only member of a national limited company (LLC), you will not be the sole owner if you decide to treat it as a corporation. But, like all companies, you need to obtain the necessary licenses and permits. Regulations vary by industry,state and locality. O U.S. Small Business Administration provides a Licensing and Permissions tool3 which contains a list of authorizations, federal licenses and registrations, state and local, needed to run a business.

“You don’t build a business, you build people, then people build the business.”
– Zig Ziglar

Advantages and disadvantages

If you choose to operate under a name other than your, you will probably have to register a fictitious name (trade name or DBA name, abbreviation for doing business as). You must choose an original name that has not yet been registered by another company.


Ease and low cost of training. The owner has full control of operations and the advantages when reporting to the IRS, because the company is not taxed separately from the owner and the rates are the lowest compared to other structures.


Unlimited liability. Because there is no separation between the owner and the company, all debts, legal obligations and responsibilities are those of the owner. Raising capital is another major disadvantage of a sole proprietorship, because you cannot sell the company's shares and banks are resistant to offering lines of credit because of the risks they represent. Another disadvantage is the burden that an individual company represents for its owner., because all decisions rest with the owner, both for the success and failure of the business.


Also known as general partnerships, They are a very simple structure for two or more people to have a business together. Each person contributes money, property, work or skill and participates in the profits and losses of the business. Even if there is no written agreement and formal requirements to create a partnership; partners must comply with registration requirements, documentation and taxes applicable to any company. There are also some steps every partnership must take to ensure they follow sound business practices when starting a new venture..

A written partnership agreement is highly recommended before getting started, where the bases of operations and relationships must be clearly specified, as we will see later.

There are two common types of partnerships: Limited partnerships LP (Limited Companies) e Limited Liability Partnership LLP (Limited Liability Companies).

Limited partnerships (LPs) and limited liability companies (LLPs) are companies with more than one owner, but unlike societies in general, Limited partnerships4 and limited liability companies offer some of their owners limited personal liability for business debts.

Limited partnerships have only one general partner with unlimited liability and all other partners have limited liability. Limited partners also have limited control over the company, what is documented in a company contract.

Profits are passed onto personal tax returns, and the spouse (the partner without limited liability) You must also pay taxes as a self-employed person. Limited liability companies are similar to limited partnerships, but assign limited liability to all owners. An LLP protects each partner from debts owed to the partnership, they will not be responsible for the actions of other partners, which can represent a good option for companies with multiple owners, professional groups such as lawyers and groups who want to test their business ideas before deciding on another, more complex structure.

“Alone we can do so little; together we can do a lot.”
– Helen Keller

Partner Responsibilities

The responsibilities of each partner are the same as a sole proprietorship, unlimited personal liability for everything the business does. A practical example is that if one of the members of the partnership decides to purchase a new and sophisticated vehicle financed in the name of the company,, both partners will be responsible for payment, even if a partner disagrees with the need for the acquisition and never uses the vehicle. Each partner is personally 100% responsible for payment. The most important basis of a partnership is the mutual trust of the partners.

A general partnership requires two people or more; and all partners share control of the business. The more partners involved in the business, the more difficult the decision-making process becomes. A written partnership agreement is important to establish limits on the exercise of controlling interest between partners.

The ability to raise capital is similar to sole proprietorship. It is limited to the personal net worth and good name of each partner. To raise more capital, will need to add partners. The existence of a written partnership agreement is essential to detail the amount and type of capital that will be offered to the partnership. If a partner is offering assets, as tools or equipment for the partnership, the agreement can define what these assets are and establish a value for each. In the same way, the looting, represent a reduction in capital provided by the partners individually, because partners do not receive a salary, therefore, any value they take from the business in cash or other assets, is a draw or reduction in the capital base. Details of how much each partner can get out of the business need to be included in the partnership agreement.

With regards to taxation, a general partnership makes its informative income tax return; listing sales, expenses, taxable income or losses.

Right away, issues a K-1 statement to each of the partners, dividing taxable income or losses between them, according to the proportion of its shareholding.

Property interests, profits and losses do not always have to be shared fifty-fifty, What should be part of a written partnership agreement. Partners must include this income or loss on their personal income tax return and pay the taxes due or receive the benefit of the losses against personal income.. Forms can be found on the IRS website.


Business Partnership Survival

The survival of a general partnership must be defined in the written partnership formation agreement, because the death of one of the partners dissolves it. Although it does not mean that it should be liquidated, but legally it is treated as a different general society. The deceased partner's interests must pass to the heirs, or be distributed among other partners. A well-written partnership agreement needs to provide details about how partnership interests are evaluated and a method, like life insurance, to finance the purchase of partnership interests by other partners.

Limited or Silent Partner. Finally, there is another type of partner known as silent partner. This is a slightly different partnership form. Most of the factors described above remain the same.

The main difference is that you must have at least one partner who is a general partner and 100% responsible for commercial operations; and at least one limited or passive partner who has no liability. Of course everyone wants to be the limited partner.

However, the problem is the silent part. The limited partner cannot exercise any control over the decisions made in the operation of the business, however, if the limited partner participates in the control, will also become responsible for commercial operations.

“If I saw further, It was because I stood on the shoulders of giants.”
—Isaac Newton


A partnership can offer many specific benefits for your business, such as:

Combination of Professional Experiences. A partnership is an opportunity to gain knowledge and experience in different parts of your business and the complementary skills to help you grow.

Greater working capital. A potential partner also represents an injection of cash and more strategic connections, which can help the company attract potential investors and raise more capital to increase production or expand its business.

Cost Savings. A business partner can be a relief from financial costs, of the expenses and capital required to run a business.

More business opportunities. One of the advantages of having a business partner is sharing labor. Having a partner can make- make you more productive, and provide- ease and flexibility in searching for more business opportunities. That way, opportunity costs, that sometimes you have to give up due to limitations, can be eliminated with a good partnership.

Work/life balance. When sharing work, A partner can also alleviate the excessive burden of responsibilities that limit your family and leisure time. A good partnership can positively impact your personal life.

Moral support. When we encounter setbacks or need to deal with work and everyday frustrations, It is essential to have a good partnership as it gives us the necessary moral support. A reliable partner is a valuable business companion.

New Perspective. How to drive a vehicle, There are blind spots that from time to time can represent great frustrations, he is still a good business partner, which represents extra eyes capable of identifying what may have simply gone unnoticed, helping you get a different perspective on the company's activities.

Tax benefits. Another possible advantage could be a tax benefit. As a society in general, According to the IRS, you don't pay income tax, but “passes on” any profits or losses to its partners, which allows partners to deduct any business losses on their individual income tax return. It is important to consult a legal and tax expert for professional guidance in this area.


It is important to pay special attention to any possible disadvantages. See some of them:

Responsibilities. In addition to sharing profits and assets, the partnership also implies the sharing of business losses, as well as responsibilities for any debts, regardless of having been contracted by the other partner. You may be held responsible for decisions your partner makes regarding the business.

Loss of Autonomy. While having full control of your business is desirable, in a partnership you share control with one or more partners, and important decisions need to be made together.

If you have been self-employed for a long time and are used to being independent, You may find it stressful not being able to continue doing things your way.

Stress and conflicts of ideas. A number of problems can arise that make working with a partner difficult., as well as conflicts due to differences of opinion or unequal efforts in business. In a partnership, relationships can turn sour and this can tip the scales when deciding on a partnership.. One solution is to consider which partners to choose, looking for someone who shares your vision, your values ​​and professional ethics; This will help you a lot in preventing unexpected problems.

Complications with business sales. As circumstances change in the future, you or your partner may wish to sell the company. This could create difficulties if one of the partners is not interested in selling it.. To avoid these types of questions, It is recommended that an exit strategy be included in the partnership agreement, including the right of preference if one of the partners decides to sell his interest in the business to third parties. This ensures that you retain the right to accept the offer, thus preventing an undesirable person from being part of the company. An exit strategy can address other issues, like the bankruptcy of a partner, disability or desire to move out of the country.

Instability. When weighing the advantages and disadvantages of a partnership, you need to consider whether you are able to deal with unpredictability. Even if you have a solid exit strategy in your partnership agreement, change triggered by a partner's situation can cause business instability.

By analyzing some of the advantages and disadvantages of a partnership, you can conclude that the advantages outweigh the disadvantages. What is more, Some of the disadvantages of a partnership can be overcome with due diligence, adequate investigation and a detailed, written agreement.

Therefore, try to make sure a partnership is a good fit for you. Question your growth goals, How a partnership can help you and what you couldn't do alone. What types of experiences can you attract to your business?; and the benefits that a good partner can provide to your company, making it better and more competitive.

Above all, take time to evaluate potential partners, make sure it is a good combination and brings both professional and psychological benefits. A business partnership is like a marriage, and as such, to be lasting, is limited to the right person, someone you can trust, and the fruits of a journey side by side.

If you want personalized information about the first steps to starting a business in the United States, contact- us by email or via WhatsApp.

It is always a great pleasure to serve new entrepreneurs looking for guidance.

Text extracted from the book America, from the author.

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