When you start a business or a one-person venture, the 'shell' you choose to hold that business directly determines how much tax you'll owe on the money you make—and how much of your own assets are on the line when you lose money.

Natural Persons & Legal Persons

• Natural person: an individual who acquires legal personality simply by being born. Legal capacity begins at birth and ends at death.
• Legal person: an organization. To make economic activity easier, the law grants certain organizations (companies, public institutions, social groups, etc.) an 'independent personality,' allowing them to enjoy rights and bear obligations just like a person. Legal capacity begins when the organization is lawfully established and ends when it is lawfully terminated (deregistered).

The Four Business Entity Types

Limited Liability Company (LLC)

1. Shareholders bear limited liability up to their subscribed capital contribution

   If losses exceed everything the company holds on its books, personal and company assets stay separate—your own property is untouched.

2. Double taxation: corporate income tax + personal income tax

   Money the company earns gets 'cut twice' by the state before it actually lands in your pocket. a. As an independent 'legal person,' the company pays corporate income tax on its profits first. The standard rate is 25%. What remains after that is the company's 'after-tax profit.' b. If you want to move that money from the company account to your personal bank card (legally called a 'dividend'), you—as an individual shareholder—also have to pay 20% personal income tax on 'interest, dividends, and bonuses.'

3. One-person LLCs face a reversed burden of proof: you must demonstrate 'separation of company and personal accounts,' or you're on the hook for unlimited liability

   Tip: having a trusted friend or relative (not your spouse) hold just 1% of the shares is enough to sidestep unlimited joint liability.

Sole Proprietorship

1. Unlimited joint liability for the individual/family

   Tied directly to your personal assets.

2. Only personal income tax on business income

   Uses a 5-bracket progressive rate: the more you earn, the higher the rate—5% to 35%.

Partnership

1. General partners (GPs) bear unlimited joint liability; limited partners (LPs) are liable only up to their contribution

   GP = the captain: steers the ship, sets the course, and weathers the storms. If the ship sinks and debts pile up, the captain pays with everything they own. LP = the passengers/investors: they just buy a ticket and board (put in money) and enjoy the scenery along the way (dividends). If the ship sinks, the most they lose is the ticket price—no one can chase a passenger home for compensation.

2. LPs only enjoy limited liability on one condition: they 'do not execute partnership affairs.' They hold nothing but dividend rights and act purely as investors
3. Distribute first, tax later: profits are allocated to the partners first, and only then does each partner pay tax according to their own status

   Profits are first 'allocated' to each partner in the ratios set out in the partnership agreement; then each partner pays tax based on what they are. If the partner is a natural person → they pay personal income tax on 'business income' (5%–35% progressive rates). If the partner is a company → its share is folded into that company's profits and taxed as corporate income.

Best suited for later-stage fundraising.

Joint-Stock Company

1. Shareholders are liable only up to the shares they subscribe to

   Similar to an LLC: liability covers only the portion of shares you've committed to buying and paying for. Each share carries both liability and dividend rights.

2. Mainly designed for companies heading toward an IPO—small and micro businesses won't need it