When Opening A Small Business, Choosing the Right Business Structure is Something that Should Not Be Taken Lightly

The Business Structure for your business is something that you should really think about and research, if you haven't done so already.

We will give you a general idea of what the more common structures are but we do strongly advise that you speak with an attorney and/or accountant to make sure that you are choosing the proper structure for your business.

Some common mistakes that people make when Opening A Small Business is they do not understand how the different structures work and how one structure may be advantageous to some but not others.

For example, it is not a good idea to operate a high liability business as a sole proprietorship. And it may not make a whole lot of sense to become a corporation if you are a one-person business. Let's take a look at a few common business structures.

Corporation - A corporation is a structure where the business is owned and operated by it's officers, however the corporation is a separate legal and tax entity from it's officers. What this means is the officers do not use their personal income to pay the corporate taxes on profits. The officers of a corporation are also personally protected should the business get sued.


LLC (Limited Liability Company) - An LLC is a structure where the business is owned and run by it's member or members, if more than one person. Different from a corporation, the members of an LLC pay taxes depending on the percentage of the LLC that they own. The taxes are paid by each member on their personal tax returns. An LLC is similar to a corporation as far as it's members being protected in a high risk industry. If the LLC were to be sued, the personal assets of the members would be protected.


Sole Proprietorship - A sole proprietorship is the easiest business structure for a small business owner because you operate the business under your full legal name dba (doing business as) your business name. The risk with a sole proprietorship is that you are fully exposed when it comes to being sued so you certainly would not want to operate as a sole proprietor if you are going to have a high liability business, especially if you have a lot of assets to protect.

You should also visit your local Secretary of State website as they will provide further information and business forms that you may need to file, depending on the Business Structure that you choose.

Partnership - A partnership is when two or more people come together to form a business. Each partner puts his or her own money into the business and shares it's profits or losses. Read more about the Articles Of Partnership.