Legal Business Structures

One of the first decisions that you will have to make as a business owner is how the company should be structured.

When beginning a business, you must decide what form of business entity to establish. Your form of business determines the amount of regulatory paperwork you have to file, your personal liability regarding investments into your business, and the taxes you have to pay. The most common business structures include:

The right structure -- corporation, LLC, partnership, or sole proprietorship -- depends on who will own your business and what its activities will be.

This section has information on legal issues involved in choosing a legal structure for your business.

When people decide to start a business, they usually have a great idea and some money to invest in the enterprise. Some people opt to start the business by themselves or with family members; others have partners or other investors who will not be involved with the management of the business.

Sole proprietors pay taxes on business income on their personal tax returns.

The sole proprietorship is the simplest and most common form of business, conducted by a single individual owner (the "sole proprietor").

If you're going into business on your own, the simplest legal structure is the sole proprietorship.

A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

If you operate as a sole proprietorship, you and your business are legally inseparable.

Small business owners often choose a sole proprietor business structure when starting up. The road to entrepreneurship can lonely.

In the commercial and legal parlance of most countries, a general partnership or simply a partnership, refers to an association of persons or an unincorporated company with the following major features:

A partnership is a for-profit business association of two or more persons. Because the business component is defined broadly by state laws and because "persons" can include individuals, groups of individuals, companies, and corporations, partnerships are highly adaptable in form and vary in complexity.

Before you start a business with others, get the answers to commonly asked questions about partnerships.