How to Choose Your Business Structure

When starting a new business there are several things to consider in your business plan, many of which fall under the business structure. The business structure includes a number of decisions concerning legal organization, tax information, and liabilities. By deciding these aspects beforehand, you can get a better handle on the business you are starting in the early stages will have a more smooth transition into other aspects of the business.

Criteria in Choosing Your Business Structure

There are a variety of criteria to consider when choosing what type of business to start, including the business formation and structure. It is important to consider each criteria when forming your company as it will determine such factors as the amount of paperwork you have, number of employees, important tax information, liabilities protection, future business plans, and other pertinent decisions.


One of the first aspects of starting a business includes the legalities of the business. This will point directly to protecting your business from potential liabilities, which in turn helps you to further decide on the proper business structure. In general, companies that are unable to handle the potential liability will veer away from a partnership or sole proprietorship and opt for a corporation instead. Consider the various legal implications and liabilities when choosing your business structure, such as lawsuits or claims which can have a negative effect on your personal and business assets.

Tax Implications

Do your research when forming your business to determine the various tax implications of the type of business you plan to create. If you have chosen a sole proprietorship or partnership, you may soon discover you have less tax options than if you are forming a corporation. By forming a corporation, you are able to avoid double taxation in many cases and can reduce your potential business losses; however much of this depends on the type of corporation you decide on.


Take some time to consider the cost and time spent with proper paperwork and record-keeping practices, especially in the early stages of your business. While starting a corporation is sometimes more convenient in regards to taxes and potential liabilities, it is not always cost effective. The time and money spent on keeping accurate records and maintaining excellent paperwork is often less with other types of business entities such as a partnership or sole proprietorship and should be considered when choosing what business structure works best for the type of business you are creating.

Unique Business Needs

Each individual business is going to have its own set of needs and requirements; therefore you should consider your own business’s needs when choosing a business structure. The needs and concerns of the business as well as its future goals should be factored in along with the owner’s and partner’s personal and financial needs and situations.  Each separate concern and need will help decide on the appropriate business structure for each individual business.

Future Plans for the Business

While the business structure you choose now does not necessarily have to remain solid for the years to come, you should still consider what your future plans are in regards to the type of business you want and where you want it to lead. By deciding on the potential future of the business now, you will be more adept at choosing the best business structure.


Forming a business requires a lot of hard work, patience and determination, especially when it comes down to the big decisions. By doing your research and considering each and every important variable, you’ll be able to wisely choose which business structure works best for the individual needs and liabilities of your business, along with what you feel the future holds for your business.