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Which legal structure will suit your new business best?

On Behalf of | Sep 21, 2023 | Business Law |

When starting a new business, numerous considerations must be approached thoughtfully. Otherwise, a promising enterprise could fail before it even gets off the ground. 

One of the first legal matters that an aspiring business owner needs to consider is how to structure their new venture. Their decision will impact how their company is taxed, their level of personal liability risk in the event that their company is sued and a host of other consequential matters. As a result, this process must be approached thoughtfully.

There are four primary options available

When choosing how to legally structure a new company, states generally permit four primary options. Many offer some hybrid opportunities, but the following four are broadly available everywhere:

  • Sole proprietorships: Operated by a sole owner, this model offers maximum flexibility, minimum legal setup and doesn’t offer personal liability protection
  • Partnerships: Usually run much like sole proprietorships but under the direction of multiple owners
  • Limited Liability Companies (LLCs): Can be owned by one or more members, offers personal liability protection, can be taxed as a distinct entity or as a corporation and takes more effort to set up than a partnership or sole proprietorship
  • Corporations: Owned by shareholders, maximum personal liability protection, rigid management structure, time-intensive legal setup, taxed as a distinct entity

Each of these opportunities features unique benefits and drawbacks. By carefully assessing your vision for your new company, you can better determine which structure will meet your needs. With that said, you can also pursue personalized feedback at any time by seeking legal guidance before committing to one option over the others.