Picking the right business structure is a foundational yet complex decision when starting a new company. The business structure you choose will have long-term impacts on everything from day-to-day operations, to taxes, to your personal liability exposure.

With options like sole proprietorships, partnerships, LLCs, and corporations, how do you know which one is right for your unique business needs? What are the pros and cons of each structure and legal entity type? Does it make sense to consult a professional or can you determine this on your own?

Sole Proprietorship

This is the simplest and most common structure for new businesses. There’s minimal paperwork – you just need any required licenses and permits, and you can get started! Tax prep is easy too since no separate business returns are required.

However, the owner has unlimited personal liability. Any legal issue or business debt falls directly on you! Careful consideration is needed when using personal and business funds.


Similar to a sole proprietorship, but two or more people share ownership. You’ll divide responsibility, decision making, and liability with your partners.

Partnerships require more formal agreements between owners to specify profit/loss distribution and authority. But you benefit from combining resources and skills.

Limited Liability Company (LLC)

An LLC separates your personal assets from the business while giving liability protection as if you incorporated. It’s not quite as rigid as incorporating.

LLCs can have single or multiple members. You’ll file articles of organization and have an operating agreement for structure. Overall, a nice middle ground!


Formal incorporation creates a separate legal entity from the owner. This protects your personal assets if the business is sued. The process is more complex, and corporations are highly regulated.

Corporations require extensive record keeping, reporting, and compliance. But they can sell stock and have access to more financing options. Important for high-growth companies.

As you can see, each structure has trade-offs to consider for your goals, business activities, and risk tolerance. Consult a professional to ensure you choose and set up your entity correctly from the start! Proper business structure lays the foundation for success.

Let me know if you need any help or have questions about choosing the right business structure. I’m happy to offer guidance so you can operate smoothly and efficiently. Here’s to building a thriving business on a solid foundation!

Note: This email blog article is for informational purposes only and should not be considered as professional financial advice. Always consult with a qualified accountant or bookkeeper for specific guidance tailored to your business’s needs.

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