How to Choose the Right Business Structure for Your New Business
Starting a business comes with a lot of decisions—and one of the most important is choosing your business structure. The structure you pick will affect your taxes, your liability, and even how you can grow in the future. But with terms like LLC, S Corp, sole proprietorship, and partnership floating around, it can feel overwhelming to figure out which one is right for you.
Here’s a breakdown to help you make a more informed decision:
Sole Proprietorship
Best for: Solo businesses just starting out.
Pros: Easiest and cheapest to set up, full control over decisions.
Cons: You’re personally liable for business debts and obligations.
Partnership
Best for: Businesses with two or more owners.
Pros: Simple to form, shared responsibilities.
Cons: Each partner is personally liable for the other’s actions unless you choose a limited liability structure.
Limited Liability Company (LLC)
Best for: Small to medium-sized businesses wanting liability protection without a lot of corporate formality.
Pros: Protects your personal assets, flexible tax options, fewer reporting requirements.
Cons: Varies by state—formation fees and rules differ.
Corporation (C Corp or S Corp)
Best for: Businesses planning to raise investment capital or scale quickly.
Pros: Strong liability protection, ability to sell shares. S Corps offer tax benefits for certain small businesses.
Cons: More complex setup, stricter rules, and more paperwork.
Factors to Consider When Choosing
Liability protection—How much personal risk are you willing to take?
Taxes—Each structure is taxed differently; some offer more flexibility.
Cost & complexity—Some structures are easier (and cheaper) to start and maintain.
Growth plans—Will you want investors or plan to hire employees soon?
The Bottom Line:
Choosing your business structure is about balancing your current needs with your long-term goals. While online research can give you a head start, it’s always wise to talk to a professional—like a business consultant, tax advisor, or attorney—before making your final decision.
Need help figuring it out? We guide new business owners through the setup process, from choosing the right structure to getting your bookkeeping and payment systems in place. Let’s get your business started on the right foot.