3 types of business structures to know

On Behalf of | Dec 14, 2023 | Business & Commercial Law

One of the first decisions you have to make when you start a business is deciding what type of structure it will have. Each type has a specific purpose and structure that must be factored into your decision. 

There are several points to consider as you’re going through the options. These are the three primary business formations a new company may utilize: 

Sole proprietorship 

A sole proprietorship is a business owned and operated by a single individual. It’s the simplest and most common structure chosen to start a business. This type of business is unincorporated, and you’re fully responsible for all debts and obligations. Profits are usually filed on your personal income tax return. 


A partnership involves two or more people agreeing to share a business’s profits or losses. A primary feature is the shared management of the company, and partners are personally liable for business debts and liabilities. There are several types, including general and limited partnerships. 

Limited liability company 

An LLC is a hybrid business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. This structure protects your assets from business debts and liabilities. This might be a viable option if your company has any sort of risk of lawsuits or considerable debts. 

Understanding how each business structure will work with your company type is critical. Once you do this, you can move toward getting everything established. Working with someone familiar with these matters can help you ensure you’ve taken the steps necessary to protect yourself and your company right from the start.