Corporate Law

Entrepreneurs Explore Your Options: 5 Business Structures You Should Understand

Startup Business

There are more aspiring entrepreneurs in the world today than ever before. The age of technology has created opportunity in unfathomable ways, and the sky truly is the limit for the hard-working dreamer.

If you have not yet decided how to structure your business idea, you should spend a little time learning a bit about your options. Here is a quick overview of five different business structures to help you start down your path to success.

A little about an S Corporation

Setting up a corporation structure for your business is typically saved for larger entities, as it is very expensive to complete the requirements. Setting your organization up as an S Corporation means that your business acts as its own person, basically.

When filing taxes, the S Corporation files its own claims. An S Corporation has less than 100 shareholders, and it functions is similar to a partnership. There is added legal protection in this structure.

Information concerning a C Corporation

C Corporation is how most of the big businesses in the U.S. are structured. A C Corp is also its own legal entity, and it can collect profits, pay taxes, and be held legally liable for any misgivings.

C Corporations can have thousands of shareholders, and do business on a huge level. When a C Corporation is formed, it continues on, even after the creator’s death.

Consider forming a Limited Liability Company

In most places, forming a business as a Limited Liability Company (or LLC) gives the owner solid protection from legal issues. An LLC also means that you are not responsible for the debts of the company, should it go under.

An LLC isn’t quite as complicated as a corporation. There are many small differences between LLC and S-Corp and it would be a good idea to know them before you choose your ideal business structure. The Limited Liability Company structure does not have to pay extra taxes or file as much paperwork to remain in good legal standing. Small businesses do well when structured as a Limited Liability Company.

Sole Proprietorship is for small business

If your business will only have one owner, a Sole Proprietorship is a great way to start. Sole Proprietorships don’t require all the legal mumbo jumbo that the other structures require. You don’t even have to register with the Internal Revenue Service.

The drawback of a Sole Proprietorship is that you are solely responsible for the legal comings and goings of the business, including debts. File the finances of your Sole Proprietorship along with your personal tax forms.

Defining a Partnership structure

Any organization started by more than one owner is automatically labeled as a Partnership according to the Internal Revenue Service. Every individual owner is legally liable for the actions of the Partnership.

A Partnership business structure is considered the most flexible of all the options involving co-ownership of a business. The Partnership is not a taxable entity, so the owners must file a 1065 form to account for the finances of the business.

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Anna Johansson is a freelance writer, researcher, and business consultant from Olympia, WA. A columnist for, and more. Anna specializes in entrepreneurship, technology, and social media trends. You can follow her on LinkedIn.

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