Small Biz MKE
Choosing a Legal Structue
Lay the Right Foundation for Your Business
Choosing the Right Legal Structure
According to the U.S. Small Business Administration, “The business structure you choose influences everything from day-to-day operations, to taxes and how much of your personal assets are at risk. You should choose a business structure that gives you the right balance of legal protections and benefits.”
Choosing a legal structure is one of the most important decisions you’ll make when starting a business. Your choice will not only affect how much you pay in taxes but also determine how much personal liability you assume and how easy it will be to secure funding in the future.
Whether you’re leaning toward forming an LLC, a partnership, or incorporating your business, it’s essential to weigh the pros and cons carefully to align your choice with your business goals. To help you navigate this critical decision, we’ve gathered some expert resources to help ensure you choose a structure that supports your business’s growth and protects your personal assets.
Sole Proprietorships
A sole proprietorship is a business entity that applies to an unincorporated business with only a single owner. This is is a very simple setup process and many small businesses go this route. You can still have employees but you do not have a partner. You would need an EIN. There are many things to consider when registering your business as a sole proprietorship. Here are some resources to help you do that:
Limited Partnerships
There are two types of partners within a Limited Partnership. One is the general partner who exercises management and control for the business and is personally liable. A limited partner has no control over the business and is liable only up to their particular investment in the company.
Limited Liability Companies
The company assumes liability, not the partners and/or shareholders.
Corporations
According to Investopedia, a corporation is,“A legal entity that is separate and distinct from its owners. Under the law, corporations possess many of the same rights and responsibilities as individuals. They can enter contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Some refer to a corporation as a ‘legal person.’”
Nonprofit Corporations
A non-profit corporation is formed to serve a public purpose and is exempt from paying federal and state taxes. It cannot be designed primarily to make a profit.
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Choose Wisely. Grow Confidently.
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