The Best Legal Structure for Your Small Business

In the start-up procedure of putting up your business, it is imperative that you correctly decide upon on the legal structure your establishment will initially obtain. Keep in mind that each entity has its advantages and disadvantages, so it must be well thought of and planned correctly. The way you will be running your business will depend on the choice that you will be making. All aspects shall be affected such as your control in the establishment, taxes, and liabilities.

In this regard, you have to know your financial goals and the organizational structure that you want to build. Below are pointers on the different entities that would best fit your establishment:

Sole Proprietorship 

If you want to be your own boss and want things done your way and your way only, this entity would best suit you. In sole proprietorship, one person runs the whole establishment handling all legal matters including the company’s loans, debts, and profits.


This type of entity gives ownership to two or more individuals. There are two kinds of partnerships. The first one is called general partnership. This is where everything is divided equally among all individuals concerned or involved with the business. The other is called limited partnership wherein only one individual has control on how the establishment is run, while the other or the other persons simply just contribute and acquire a certain share of the profit. In addition, keep in mind that it is not just you who would be affected with certain liabilities that may be incurred, but also the other partners as well.

LLC or Limited Liability Company 

A limited liability company or LLC is a mixed structure that permits shareholders, partners, or owners to give boundaries to their personal liabilities while acquiring the flexibility and tax benefits of a partnership entity. In line with this, the individuals involved in this type would be secured from personal liabilities with regard to business debts. However, exceptions are made if an individual or persons involved were found guilty of illegalities or unethical actions that were done in the establishment.


In this type of entity, the contributions benefit the company’s members and it is owned by the same individuals it serves and aids. These individuals or persons are the ones who run the organization’s direction and mission goal.


A corporation is a type of entity that is detached from its owners under the regard of the law. It is liberated from its owners having authority to sell rights of ownership through stocks, buy and sell properties, and also have the legal right to sue, and to be sued as well.

It is important for you to keep in mind the long term goal that you or your possible business associates have in mind. Your personal knowledge in making the right choice would have a great effect on the outcome of your initial investment. If you think you have worked on sufficient research regarding this matter, but still unsure of your final decision, it is highly recommended that you seek professional assistance and advice as well regarding this matter to avoid any unnecessary monetary expenditures in the future.