3 Tips For How To Choose The Right Business Structure

If you’re interested in starting your own business, one of the first decisions you’ll need to make is how to structure that business. However, if this is your first foray into the world of owning and operating your own business, you may be unsure which business entity will be the right choice. So to help make this process a little easier to understand and figure out, here are three tips for helping you choose the right business structure for your new business.

Know Your Options

Before you can confidently make the right choice for your new business structure, you have to know what your options are. According to Mark J. Kohler, a contributor to, the four most popular types of business entities are sole proprietorships, LLCs, S Corps and C Corps. Your decision on which entity will work best for your specific business will vary depending on quite a few aspects. For example, how much money your business is making, the number of partners or investors, your feelings about taxes, and more. Because of this, it’s important that you research each option thoroughly before deciding how to proceed.

Your Comfort With Risk

One big factor that will help determine what type of business structure you want to create will be how comfortable you are with risk. According to Andrew L. Wang, a contributor to, the risk factors associated with some business entities will be much greater than with others. With sole proprietorships, if there ever were to be a lawsuit against your business, they could come after everything you have and own. But if you are a LLC or a form of a corporation, your personal property can be protected against lawsuits. Knowing this, you may want to gauge at least part of your decision on whether or not you think the chances of a lawsuit are high.

The Complexity Of Your Business

Arguably the biggest factor that could help you pick what business entity to become is the complexity of your business. For simple, small businesses with just one person and minimal amounts of income, a sole proprietorship may make the most sense. But according to Sammi Caramela, a contributor to Business News Daily, businesses that are more complex, have shareholders or various employees, have complicated taxes, or have to report certain things to the government, could benefit from having a business structure that is more suited to their more complicated needs.

If you’re trying to figure out what type of business you want to be starting, consider using the tips mentioned above to help you discover which option will be best for you and your new business.



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