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4 Types of Business Structure

What is business structure?

When setting up your new business, you must setup your business structure. The structure you select will affect how much you pay in taxes, your ability to raise capital, the paperwork required to file for certain things, and your personal liability. Before you register your business with your state, you will need to select a business structure. Depending on the structure you select, you will either be able to use your social security number to file paperwork or you will need to get a tax ID number.

Types of Business Structures

Sole Proprietorship

A sole proprietorship is one of the easiest business structures to setup and it gives you complete control of your business. If you conduct business, you are automatically identified as a sole proprietorship, unless you register as another type of business entity.


A partnership is setup when there is more than one person owning the business. There are two kinds of partnerships: limited partnership (LP) and limited liability partnerships (LLP). Limited partnerships sets up only one general partner with unlimited liability and the other partners have limited liability (and in most cases limited control over the company). Limited liability partnerships are similar to LPs but give each partner limited liability. This means no partner will be responsible for the actions of other partners.

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Limited Liability Corporation

Limited Liability Corporations allow take advantage of the benefits that come from both corporation and partnership business structures. LLCs protect your person assets (in most cases), should your company face bankruptcy or lawsuits.


A corporation or a C corp is an entity that is separate from its owners. Corporations are independently taxed, make a profit and can be held liable for damages. While a corporation offers the most protection for its owners, it is also the most expensive business structure to setup.

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