Neuberger, Griggs, Sweet & Froehle, LLP

What type of business entity should I choose?

person signing a document for starting a businessStarting a new business is a process with an extensive amount of decisions. One of the most important decisions for any new business owner, choosing the business entity when incorporating, is more abstract, but has significant legal and financial implications for the future. Specifically, the type of business entity determines required documentation and tax payments, specifics of the resolution of liability issues, and whether raising money is possible.

With so much at stake, settling on the right business structure is a decision that should be made after much thought and advice. This article is not meant to give the latter, only to inform potential business owners of the basic types of business. For expertise specific to the situation, contact a local lawyer that can assist with the decision, filing the correct paperwork, and any other best-laid practices that can prevent serious issues.  

Sole Proprietor

A sole proprietor business structure is the picture that most people associate with a business. The business owner manages all daily operations, assets, and liabilities. Under this business structure, the owner is personally responsible for all liabilities. Sole proprietor businesses are appropriate for many different kinds of businesses, including service-oriented and at-home businesses.


A partnership is a business structure with multiple owners. Because there are multiple partners, the profits, taxes, and liabilities are shared. With several owners, the partners are all personally responsible for liabilities. Practically, this business structure is ideal because owners can share the workload, benefits of business services (i.e. marketing, operational needs, supply purchasing, etc.) and contribute individual expertise.

Limited Liability Company

A LLC is right for company owners who want to limit their personal responsibility for liabilities (plus other advantages and disadvantages which can be discussed with a lawyer or business adviser). Often, a limited liability company is comprised of different owners with differing amounts of investment. If an owner wants to leave the company, they are only responsible for the amount invested.


A corporation is an entity that is formed and taxed. Managers are not personally responsible for the liabilities, though a corporation can be expensive to form. A corporation can be funded by a pool of investors and run by directors. Because of the entity structure, extensive records are required and the profits are distributed to investors.

The materials on this website are provided for informational purposes only and do not constitute legal advice. These materials are intended, but not promised or guaranteed to be current, complete, or up-to-date and should in no way be taken as an indication of future results. Transmission of the information is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver. You should not act or rely on any information contained in this website without first seeking the advice of an attorney.


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