What Form Should Your Business Take?

You have an idea for a business, some start-up money and a solid business plan. But you’re not finished yet: you need to choose the best formation for your business based on your goals, resources and vision for the future. The business formation you choose will have concrete management, tax and liability consequences, so it’s important to protect yourself and choose wisely. While it’s best to consult an experienced business law attorney before making any final decisions, it can help to have an overview of how various business formations differ so you know which one might be best for you.

Sole proprietorships

If your business is basically just you, a sole proprietorship may be the best way to go. A sole proprietorship is the simplest and least expensive option of the available business formations. It does not, however, protect you from liability.


Partnerships, as the name implies, involve more than one person running the business. Partnerships may be general, in which all involved parties share profits and liabilities equally; or limited, in which one partner invests money, receives profit and is protected from loss, while the general partner manages the day-to-day aspects of the business and is the partner at risk for liability. People involved in a business partnership are taxed individually, and not as a separate business entity.

Limited Liability Company (LLC)

Individuals in an LLC are individually shielded from business liability, but are taxed as individuals according to their share of the business’s profits. Depending on the type of business, you may need to secure a business license. There is also some paperwork involved in starting an LLC, including filling out your Articles of Incorporation.


Corporations operate independently of their owners, while shareholders split the profits. Corporations require the most paperwork of all the business formations, including written bylaws that outline members’ responsibilities, daily operations and other essential information.


The main advantage of non-profit organizations is that they are tax-exempt. In order to qualify as a non-profit, an organization must provide services that are educational, scientific, literary, charitable or religious. There are certain rules and limitations applied to the activities of non-profit organizations that allow them to keep their non-profit status.

Depending on the vision, structure and purpose of your new business, there is likely a specific business formation that would best suit your needs. An experienced business law attorney can evaluate your goals and help you navigate the process of getting your business off the ground in a way that protects your interests and supports growth.