Choosing a Business Entity

One of the decisions that you will need to make as a new business owner is how the company should be structured—what legal entity you should use. 

There is no one "best" entity choice for your small business.

Take some time to educate yourself about the various choices and turn to experts to help you understand the issues involved. Attorneys and tax accountants have insights and specific legal and financial information that could affect your decision.

There are four basic entity choices, each with some variations depending on specific circumstances of ownership:

Sole Proprietorship

Partnership

Corporation / S-Corp

Limited Liability Company

In making your choice, you will want to take into account the following factors:

• Your vision regarding the size and nature of your business.
• The level of control you wish to have.
• The level of formality or structure you are willing to deal with.
• The business's vulnerability to lawsuits.
• Tax implications of the different ownership structures.
• Expected profit (or loss) of the business.
• Whether or not you need to re-invest earnings into the business.
• Your need for access to cash from the business.