Four Different Ways To Structure Your Business



Four Different Ways To Structure Your Business

Sole Proprietorship: 

A sole proprietorship is the default business structure. In other words, all businesses are sole proprietorships until they indicate otherwise. With a sole proprietorship, you are the sole owner of the business assets and liabilities, which means there is no separation between the business entity and you as a person. The downside is that you can be held liable for debts and contracts of the business.


If you are starting a business with one or more partners, then you have a partnership. Business partners add to the business and receive profits from the business. A partnership is similar to a sole proprietorship, but it includes more than one person. Most states require the partners to sign some sort of partnership agreement to outline how profits are shared and how liability is distributed.

Limited Liability Company (LLC)

LLCs create a separate legal business entity that protects the business owner from personal liability, thus protecting your personal assets. Each state has different rules and regulations relating to LLCs, so be sure to evaluate state-by-state rules. The administrative burden of forming an LLC is higher than a sole proprietorship, but you as the business owner receive more personal protection. As an LLC, you have different tax liabilities than as a sole proprietorship.


Corporations are the most complex business structure and are how most large companies are structured. This type of structure will provide you with the most protection, but it requires substantial paperwork and administrative work. It is intended for large well-established businesses that need substantial liability protection.

A sound approach is consulting with an attorney about which structure makes sense for your business and what local rules and regulations you should be aware of and follow. Similarly, talking with an accountant to better understand your local, state, and federal liability requirements could also be helpful. The U.S. Small Business Administration also has an excellent 

to help you determine which structure may be best for you.



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