Which of the 6 business structures is right for you?
Starting a small business takes passion, persistence ― and paperwork.
When you take steps to establish your company within your city, county, state, and the federal government, you must choose one of six business structures, each of which will have different tax and legal implications. The U.S. Small Business Administration provides a great overview of each of the 6 business structures Check them out by clicking the following links:
- Sole proprietorship
- Limited liability company (LLC)
- Corporation (or C Corporation)
- S Corporation
Before making a selection, Entrepreneur.com recommends you consider these 5 factors1:
- Legal liability: How much legal responsibility do you want to assume with your business? If you want to protect your personal assets in a lawsuit, you may want to choose ownership types other than sole proprietorships and partnerships.
- Taxes: Which structure offers better tax advantages for your company? Consult a tax advisor for assistance.
- Formation and ongoing administration costs: Business licenses cost money annually or biennially. Can you keep up with the paperwork and the cost to maintain the business structure of your choice?
- Flexibility of ownership: Which structure gives you the most flexibility as an owner, considering the needs of the company and the other owners (if there are any)?
- Future needs: Will a partnership make sense 5 or 10 years from now if you plan to sell?
To learn more about starting a small business, check out the Stages of Your Business section of our Small Business Learning Center.
1 BMO Harris Bank does not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.