Which business structure is best for your company?

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Choosing a business structure is one of the first decisions that entrepreneurs need to make as they begin a new company. There are several different types of business structures, from a sole proprietorship to corporation. Let’s examine the different types of business structures and what kinds of businesses work best in each.

Sole Proprietorship

A sole proprietorship is one of the simplest types of business structures. You don’t even officially have to register as a sole proprietorship—you automatically fall under this designation if you are doing any sort of business and don’t register under any other business structure. Under a sole proprietorship, your business assets and liabilities are not separate from your personal ones, and you can’t sell stock. A sole proprietorship is great for entrepreneurs who want to test out a low-risk, early-stage business idea, or who plan to work alone.


Are you working with a partner (or several partners) on small business? Then a partnership is the right structure for you. There are two types:

  • Limited Partnerships (LP): One partner has unlimited liability, and all others have limited liability—and limited control over the company.
  • Limited Liability Partnerships (LLP): Each owner has limited liability, which protects each partner from being responsible for the group’s debts, or actions of another partner.

Like sole proprietorships, partnerships are good for the early test stages of a startup. This business structure also works well for small companies owned by several people, such as a dentist or attorney group.

Limited Liability Corporation (LLC)

The limited liability corporation is one of the most common types of business structures, especially among small businesses. Filing under an LLC will separate your personal and business assets so that if your business is failing or in debt, your personal assets will not be affected. LLCs are good for small but growing businesses or businesses that pose a medium to high risk. An MLM business connected to a network marketing company such as weight-loss company Xyngularalso fits well under this designation.


Corporations are entities separate from their owners. They can turn a profit, owe taxes, and be held legally liable for missteps. Corporations are subject to a variety of regulations, reporting, and record keeping, and they offer their owners the most protection from personal liability. To raise funds, they can sell stock in the company. This designation is best for proven small businesses, risky ventures, and business that are intended to be sold or that reach IPO.

To decide which types of business structures are best for your venture, consider your business’s size, how you plan to grow it, and how risky it is. Remember that over time, a business may switch structures—your small partnership may one day grow into a corporation.

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