What Business Structure Is Right For My New Business?
After lots of dreaming and planning, you’ve decided to start a business. You’ve chosen a name, identified target customers and have a color scheme for your website ready to go. But before you get too excited, there are many additional considerations to be made. One of the most important is deciding on a business structure for your enterprise.
Why Your Business Structure Matters
According to the Small Business Association (SBA), your business structure impacts:
- paying taxes (no longer your employer’s responsibility)
- personal liability (your business may incur debt or be sued)
- paperwork filing required
- raising capital
Decide Early
The SBA stresses the importance of choosing a business structure as soon as possible as many other important pieces of your business hinge on it. Without knowing your structure, you can’t:
- register your business with your state
- apply for a tax ID
- open business banking accounts (the tax ID is a requirement for this)
While you can change your business structure down the line, the SBA cautions that this may not be a simple process. If you think this decision through at the onset, accounting for present and future business needs, you could save yourself a lot of trouble years from now.
Each structure has its pros and cons. Your situation, preferences and business vision will dictate the best option for you.
Your Options
According to the IRS, the most common business structure types are:
- Sole Proprietorship
- Partnership
- Corporation
- S Corp
- Limited Liability Company (LLC)
Note: There are other, business structures outside the scope of this article. You can read more about limited liability partnerships, non-profit, B Corp, and Cooperative (Co-op) business structures by following the links.
