If you are starting your own business, then you will find that the planning stage is perhaps even more complex and difficult than the execution of the business plan, itself. One subject that many new business owners get stuck on is that of business structure, and generally because they don’t know enough about their options to make a well-informed decision. In order to commit to a business structure with confidence, you need to learn all you can about each type.

Here is what you need to know about how to choose a professional business structure:

Sole proprietorship

This is the simplest, and therefore the most common, business structure there is. A sole proprietorship is a business owned by a single person. This means that the owner makes all the major business decisions, but also that the owner must be fully accountable for any legal issues that arise on the business’ behalf.


As the name suggests, this business structure is formed by two or more people who assume a share (either equal or unequal) of the business’ profits and losses. The legal and financial obligations for each partner are the same as they are for a sole proprietorship.

partnership business


If your business is large or complex, then you may need to consider incorporating it. While incorporation does cost you some time and money, it is your best option if you want to completely separate your personal finances from your business. As a corporation, your business is a separate entity from you, and it therefore stands on its own in legal and financial matters (i.e. your business can be taxed and/or sued, but it will not affect your personal accounts).

Limited Liability Company (LLC)

This is a cross between a corporation and a partnership. In an LLC, you are released from certain legal and financial liabilities that your business takes on. For example, your business’ profits and losses may transfer straight to you without business taxation, but at the same time, you are able to steer clear of your business’ legal liabilities. For many, an LLC is the ideal business structure, as it offers the best of both worlds.

As you can see, the type of business structure you choose will determine certain tax and legal obligations, restrictions, and benefits for your business. Therefore, it is not a decision to enter into lightly. Be sure to weigh out all of the options detailed here in order to make the best choice for your business needs. Of course, when making such an important decision for your business, it is always a good idea to consult with a business attorney who can guide you through the process.

Lucilla Faubion and her best friend of 20 years just formed a retail clothing store and formed as a partnership. They obtained a Kabbage business financing loan to help stock the store and plan to open in mid-October!

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