Choosing a structure is one of the most important decisions you will make as you create your business. It will shape how your business functions and your opportunities for the future.
The U.S. Small Business Administration explains each type of business structure available to you.
In a sole proprietorship, you have all the control. It doesn’t make a separate business, but rather includes all your business and personal assets and liabilities. You will be responsible for everything that happens in the business.
A partnership brings two or more people into the business. You can choose an LP, which is a limited partnership, or an LLP, a limited liability partnership. An LP typically has one partner with unlimited liability and the other have limited liability and control. An LLP is similar, but every partner has limited liability.
A corporation is a separate entity from your personal assets, but you can still be held legally liable for it. It can be more expensive to create, but it does protect you from personal liability. There are also S corporation and C corporation options, which can help your tax situation.
Limited liability company (LLC)
An LLC separates your personal and business assets. It is sometimes seen as a mix between a corporation and a partnership. You won’t have any personal liability and may have lower taxes.
As you consider which business structure is best for you, think about how you want legal liability to look, what the tax implications will be, how much money you are willing to put into formation and if you need flexibility for the future.
It’s always best to discuss your future business with a lawyer to make sure that you are choosing the best structure for your situation.