How to Pick the Best Business Structure for You


Choosing a business structure is always a crucial step for entrepreneurs when making a decision to start a business. And while a business attorney can provide the differences and impact in each structure, it is up to you (the owner) to decide how and what you envision for your business. The future of your business in varying times of growth can mandate a change in business structure and often causes business owners to have regretted not taking the time to understand what each structure can mean when it comes to taxes and personal assets.

There are five business structures to choose from and each one has its own pros and cons. The right structure must be selected according to your business goals, but also be mindful of how you plan to structure your business in the future of how you want to run it. The 5 structures are:

  • Sole Proprietorship
  • Partnership
  • LLC or PLLC
  • Corporation
  • Cooperative

When making a choice on the structure of your business, here is what you should know:

Setup Requirements

The first thing to consider when choosing the structure is its requirements. You have to figure out what you need in order to apply for its legal structure. There are some structures that are legally less complex than others. For instance, sole proprietorships and partnerships are easy to form and require less paperwork than the other structures to set it up since it is typically formed as LLC or PLLC and are often meant for small businesses that limit the liability of the business owners assets.


Some business structures such as corporations assert more restrictions on business (especially if using personal funds to start up your business, as this is a huge no-no if not certain how to write off paying yourself back). Not following the legal processes can lead to cancellation of incorporation. That is why you have to be careful that the business structure you choose gives you enough flexibility to keep your company growing according to your own decisions.

Tax Handling

If you’ve just started your company and don’t want to see it fall in the dust of taxes, you will have to make smart and savvy decisions. Choosing sole-proprietorship for your company can be taxed you double taxes; one in terms of the company and the other on your personal growth. However, an LLC or PLLC can prevent this from happening and can make sure that you get taxed only once.

Personal Liability

Choosing a corporation, LLC, or PLLC style for your business can make sure that the stockholders, shareholders, or your business itself can’t be personally liable for claims on the properties owned. These business styles should be preferred if you want your business to provide you with certain tax benefits and flexibility.


If you’re looking to secure investments and funding from banks, investors, and capital ventures; you’ll surely look to choose the appropriate corporation style for your business. A corporation attracts the eyes of investors and ensures the longevity of your business. On the other hand, if you pick LLC or PLLC for investments, it can hurt your chances and make it difficult for you to secure long-term investors because a part of your personal assets are tied in with your business structure (in how you do taxes). The fact that corporations can sell stocks, any time they seem fit, makes it a reliable investment option for capitalists.


As said before, different business structures have different requirements. Some are more complex than others. You have to ensure that you complete all your licenses and permits before or immediately after registering your business (most times you need an Employer Identification Number (EIN). These regulations can vary in terms of local, state, and federal laws.

These are just a few factors you should consider when deciding on a business structure. This is also why it is appropriate to seek legal counsel before choosing (especially if deciding on a structure). Every state has different laws and while a federal structure is the main choice, there may be other things required by the local government or state that can impact your decision.