So You Are Forming A Business, Which Type Should You Choose?


It seems like more and more people are deciding to start their own businesses these days for a variety of reasons. When the economy collapsed in 2008, some people who had lost their jobs decided to start their own businesses rather than risk being laid off in the future by another company.

There is a great deal of responsibility that goes along with starting your own business, and your first decision is just as important as every decision you will make throughout the history of your business. That first decision you will make will be on the legal form your business will take, and it is a decision that must be made by consulting an attorney.

Sole Proprietorship

You can open a sole proprietorship using your own name, or you can file a "doing business as" certificate to call your business something else. Your local county or city government may require you to get a business certificate to get started, but that is the only real paperwork constraints on a sole proprietorship.

A sole proprietorship is the cheapest and easiest form of business to utilize, but it also offers the least amount of protection to your personal assets. If someone decides to sue your company, you could lose all of your personal assets in the lawsuit. A sole proprietorship allows you to run your business, but it does not protect your personal property and finances from potential legal action.

Limited Liability Company (LLC)

The rapidly growing popularity of LLCs can be seen in the ways in which laws are being changed to make it easier for people to utilize this business format. In the past, there had to be at least two business owners to be able to start an LLC, but now individuals can utilize an LLC as well. The LLC format is very flexible, and it allows you to have partners and business owners from anywhere in the world.

Filing for an LLC can be expensive, but it offers protection you do not get from a sole proprietorship. An LLC is its own entity, which means that any lawsuits brought against the LLC do not affect the personal assets of the owners.


Corporations are the most expensive and complicated types of businesses to form, but they can offer operational and tax benefits that make them practical to use. There are two primary forms of corporations that are referred to as C and S corporations, but both are very different in many ways.

An experienced business attorney can explain the main differences between the two forms of corporations, and give you advice on which corporation format is best for your business. A corporation involves several annual tax filings, a mandatory board of directors, and several other procedural elements that need to be considered before you make your final decision.

The very first decision you will make regarding your business is one of the most important ones. If your business is not the right legal format, then you may find it difficult to grow in the future, and you will be leaving yourself open to personal financial damage. Consult with an experienced attorney to determine which legal format is best for you business, and develop a plan for getting your business off the ground.

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