Thinking of Starting a Business? Learn About the 4 Business Structures


When it comes to starting a business, whether it’s an LLC in Florida or LLP in California – there is seemingly an endless supply of work that needs to be done.  There is seemingly an endless supply of work that needs to be done. From coming up with the budget, figuring out your niche market, hiring employees, and more, you could be planning for months or years before opening your doors.

Taking your design or development passion from freelance or full-time job to business is a big step. While it can be exciting to visualize your marketing plan or layout out your storefront, there’s one part of the process that’s a huge bore: the legal side.

A lot of that legal mumbo-jumbo is important when hiring employees, paying your taxes, or determining what your business structure is going to be.

What exactly is your business structure? It’s the legal organization of your business that determines how you pay taxes, personal liability, filing processes and more.

There are four primary types of business structures and we’re going to run through them quickly in order to give you an overview.

Sole Proprietorship

When it comes to business structures, this is the most common and the easiest to understand. You can probably guess what it means by just reading it: you and you alone are the owner of your business and you have complete control over everything.

It also means that your business is not a separate entity, so your business assets and liabilities are tied in with your personal assets and liabilities. So in the event of your company going bankrupt or defaulting on a business loan, your personal effects will also bear the cost.

You will be filing taxes as self-employed in this situation, putting the business’ profits and losses on your personal income return.

The biggest drawback to being a sole proprietor is the money issue. It can be difficult to raise money, as banks aren’t exactly jumping at the chance to hand out a loan. Therefore, you’re going to have to get creative, reaching out to angel investors or exploring the private loan market.


Even if you’re not a business expert, you have no doubt seen the LLC acronym planted behind a number of businesses. It’s not part of their business name, but is in fact what their business is.

LLC stands for limited liability company and is a relatively new business structure due to its hybrid nature between a corporation, mixing elements between a corporation and a general partnership. For that reason, LLCs can be a bit tricky to initially set up which is why many people get some help beforehand.

The biggest benefit to having an LLC is making sure your personal assets are protected just in case your business is sued or has other legal problems. Despite its initial difficulties in setting up, it is the easiest and best way to protect your personal assets. Once you’re passed the initial setup stage, everything becomes smoother and clearer.

LLCs can be owned by just one person or multiple, and owners are referred to as members. All of the profits are passed to the members directly instead of staying with the business, so the LLC is only taxed once. You won’t be doubled taxed like some corporations are. Learn more about LLC Formation Services.


Pretty simple to explain, a partnership is similar to that of a sole proprietorship but instead of one person there are multiple people. These people will share and manage the business profits and losses.

While there are various forms of partnerships, the most common is a general partnership where the partners assume liability for the company as a whole. There is also a limited partnership with investors. They have no control over the business itself nor share the same liabilities as the general partners would.

Other than that, it’s pretty similar to a sole proprietorship. One important piece of advice is to make sure you have your partnership in writing as to avoid any potential legal issues down the road.


It’s unlikely you’d be forming your business as a corporation, since these tend to be larger businesses that trade on the stock market. It comes from a group of shareholders come together with their common stock.

There are many different types of corporations, and depending on the type will determine how it is taxed and managed. Since it’s highly unlikely you’d become a corporation with design or development this early, it’s not worth diving into.