If you’re thinking about starting a new business, you’ll have to select the proper business structure (also referred to as the business entity or business form). Choosing the best business structure for your new business is a big first step, and shouldn’t be taken too lightly. In fact, selecting the best business structure is essential to being a sophisticated business owner and will increase your likelihood of success.
While there are many books and articles on business formation, many fail to properly evaluate what business structure to properly select. It’s also easy to get confused with all the choices because businesses come in so many shapes, sizes, and varieties. However, this article aims to simplify your process a little, and get you thinking in broad terms before you get into some of the finer details.
In this article, we’ll go over the main considerations before choosing a business structure, types of business structures, and some of the pros and cons of each business form. We’ll briefly explore the business structures of sole proprietorships, partnerships, limited liability companies, and corporations.
NOTE: If you would like more detailed information on a particular business structure (e.g. partnership or limited liability company), please look for hyperlinks to articles that go into more detail on the different business structures.
Next, let’s take a general look at the different types of business structures out there.