“Corporate structure” refers to the setup of a business; this typically includes business registration information, and may also refer to leadership structure and organizational chart. The most common corporate structures are:
– Sole proprietorship
– C corp
– B Corp
Sole proprietorships are a business structure where the business and the person are viewed as one and the same; there’s no distinction between personal and business assets and liabilities. If you’re conducting business, but haven’t registered as any other type of entity, you’re automatically considered a sole proprietorship.
There are two common types of partnerships, which allow two or more people to go into business together: limited partnerships (LP) and limited liability partnerships (LLP). LPs typically have one general partner who has full liability, while other partners have limited liability. In an LLP, all partners have limited liability.
Limited liability companies (LLC) create a barrier between personal liabilities and business liabilities, while still allowing profits and losses to be passed through. LLCs blend the benefits of a corporation and a partnership; namely, the lower tax rate of a partnership with the protection of a corporation.
A C corp is the most common type of corporation. A corporation is a separate legal entity that can make a profit, pay taxes, and be held legally liable. While corporations offer substantial protection from personal risk, they tend to be more complicated and costly to run.
B corps, or benefit corporations, are different from C corps in that they focus on delivering a positive impact for the public. These entities prioritize mission, purpose, and accountability, while also generating financial profits. They’re taxed like a C corp, and may be required to submit annual benefit reports.
There are 32.5 million businesses in the US. As of 2019, about 76% have no paid full-time employees; examples include sole proprietorships, contractors, real estate agents, consultants, or freelancers. There are fewer than 4,000 public corporations in the US today.
Financial institutions and fintechs struggle to access fresh, accurate business registration data, particularly for new or smaller businesses. This is due in part to different registration methods and record-keeping approaches between states.
The Secretary of State handles business registrations in most states. Some offices have a digitized approach accepting and approving requests, while others are manual. Processing times vary widely. Most states do offer an online database of registrations, but searches must be conducted individually. Data on older corporations may not be available online.
Accurate, reliable corporate structure data — such as registration details, registered agent information, and address information — are vital for mitigating Know Your Customer (KYC) and Know Your Business (KYB) compliance risk and avoiding inefficient, overly manual research in the underwriting and onboarding processes.