De Raquel Manuela

B-Diary: Business Legal Structures

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Choosing the right legal structure for your business is a very important decision. In this week's B-Dairy I am going to speak generally about each one. Before we being, I would like to remind everyone that I am not a lawyer or an accountant. This post is not legal or financial advice. Let this blog post serve as an introduction to the structures. It may help with your research or help direct your questions when consulting your lawyer or accountant. 

Sole Proprietorship:

In this structure, the business is owned by a single person. The owner and the business are a same entity. There is no distinction between the owner and the business, which leaves the business owner liable for the business's debts and lawsuits. The owner's personal assets can be at risk. But, don't let this scare you because, according to The Tax Advocate Group, Sole Proprietorship is the most common legal structure. Many people who are sole proprietors purchase different types of insurances to protect themselves against the particular liabilities that are most commonly associated with their business' industry. 


Just as the name implies, a partnership is a business owner by two or more people. And, as in a Sole Proprietorship, there is no distinction between the owners and the business. The partners liable for the business's debts and lawsuits. Further more, one business owner can be held liable for another owner's actions. One can imagine how legal contracts between partners are very important in this legal structure.  


There are different types of corporations. In general, in this legal structure the business is its own legal entity. It is separate from the owners or shareholders. Keep in mind that liability changes according to type of corporation, state laws, industry and services provided. 

Limited Liability Company:

The owners of a Limited Liability Company or LLC are called members, and members can be individuals or other companies. Like a corporation, the members and the business are separate entities. As the name suggests, the members have limited liability to the business's debt and lawsuits. 

I learned a lot of this information from The Tax Advocate Group and You may want to visit their websites to learn more. There is a lot of information that I have not discussed such as: How does a business file taxes? How does the owner, partner, shareholder or member file taxes? Also I have not discussed start up costs associated with each one. These vary by state, so it's always a good idea to reach out to a professional and ask these questions. 

I hope this gets you started on your search for the right structure for your business. :)