Different Types of Business Structures You Should Know

It is necessary to choose an appropriate business structure by first analyzing your business goals and relevant laws. When you define your goals, it becomes easy to choose a structure that suits your company’s culture. You may need to change the structure as the business grows. These are the various business entities and their advantages and disadvantages to help you select the best legal structure.

Sole Proprietorship

It is considered to be the simplest business structure. Ideally, the business and owner are the same and responsible for the business’s obligations and revenue. This is the perfect type of business for those that want to be their own bosses. The main problem with this type of business is that there is no protection or separation of assets. This may prove to be a serious challenge when your business grows.


registering a businessThis type of business is owned by two or more persons. Partnerships can be divided into general partnership and limited partnership. In a general partnership, everything is shared equally among shareholders. On the other hand, a limited partnership is when a single shareholder is in charge of business operations, whereas other shareholders contribute capital and get part of profits. This type of business is perfect when you start a business as a family. It allows partners to share both losses and profits.

Limited Liability Company

This type of business has a hybrid structure where owners or shareholders protect their personal assets against business liabilities. However, you can only be protected when you do not act in an unethical, irresponsible, and illegal way when running the business. Another benefit of LLCs is that you are not double taxed as the case with corporations. Forming an LLC is a bit complicated, but you can find llc services that can help you.


A corporation is considered to be a separate entity from the owners. This means it can be sued and even sell the property. Ownership can be sold like stocks. Corporation formation fees vary from one state to another. The good thing about a corporation is that you are protected from personal liability. Your business can operate indefinitely, which explains why it is preferred by customers, creditors, and investors. You will also find it easier to raise capital from different investors.


This is the type of business is owned by consumers. You can also think of it as user-owners. The owners share profits. The good thing about a cooperative is that it enjoys lower taxes. Members are not taxed on their income.