Choose a Legal
Business Structure
Common Business Structures
How will you legally register your business? In the United States, you can choose from four main business structures. Each business structure is formed and managed differently, with important legal and tax distinctions.
Sole Proprietorship
Limited Liability Company
General Partnership
Corporation
This guide does not cover non-profits and other business structures specific to certain professions. For more information about these business structures, visit your state's website.
Sole Proprietorship
A sole proprietorship is the simplest and easiest business structure to form and manage. This business structure is for businesses that have one owner.
Reasons for Forming a Sole Proprietorship
The following are common reasons why small business owners form a sole proprietorship:
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test a business idea before forming a more formal business structure such as an LLC or corporation
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less expensive to create and maintain than an LLC or corporation
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doesn't have as many regulations and paperwork as an LLC or corporation
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business taxes are simpler to plan and prepare
How to From and Register a Sole Proprietorship
Most states don't require a sole proprietorship to file paperwork to form this business structure at the state level. However, some states require sole proprietors to obtain a state business license. Check your state's government website for more details.
Other Requirements for Starting a Sole Proprietorship
The following are other common requirements for a sole proprietorship:ā
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a registered DBA (if needed)
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federal employer identification number from the IRS (if required)
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state employer identification number or state tax number (if required by your state)
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business licenses and permits
If you need professional help filing a DBA or obtaining a federal employer identification number, use an online filing service such as Swyft Filings.
For more detailed information about sole proprietorships, read Nolo's latest edition book/ebook called:
General Partnership
A general partnership is a business structure for businesses with multiple owners who want a simple way to form and manage their business.
Reasons for Forming a General Partnership
The following are common reasons why small business owners form a general partnership:
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test a business idea before forming a more formal business structure such as an LLC or corporation
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less expensive to create and maintain than an LLC or corporation
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doesn't have as many regulations and paperwork as an LLC or corporation
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business taxes are simpler to plan and prepare
How to Form and Register a General Partnership
Most states don't require general partnerships to file paperwork to form this business structure. However, some states make it optional for a general partnership to register.
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Some states require a general partnership to obtain a state business license. Check your state's government website for more details.
Other Requirements for Starting a General Partnership
The following are other common requirements that a general partnership will need:
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a registered DBA (if needed)
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federal employer identification number from the IRS
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state employer identification number or state tax number (if required by your state)
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business licenses and permits
If you need professional help filing a DBA or obtaining a federal employer identification number, use an online filing service such as Swyft Filings.
If you need help forming a Limited Liability Partnership, use CorpNet.
For more detailed information about general partnerships, read Nolo's latest edition book/ebook called:
Limited Liability Company
A Limited Liability Company is a business structure that is a separate legal entity. It can have one or multiple business owners.
Reasons for Forming a Limited Liability Company:
The following are common reasons why small business owners form an LLC:
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protection of personal assets from business lawsuits
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more options for business tax savings
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easier to form and manage than a corporation
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a more formal business structure than a sole proprietorship and partnership
How to Form and Register a Limited Liability Company:
To form a limited liability company, you must file articles of organization* with your state government and pay a state filing fee. In addition, you will also need to file an IRS form to elect a tax classification for your LLC if you don't want the IRS to choose one for you.
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Many states will require certain licensed professionals to form a professional limited liability company instead of a general limited liability company.
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Check your state's website to learn more about LLC filing requirements, costs, and ongoing maintenance.
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*Articles of Organization are also called in some states a certificate of organization or certificate of formation.
Other Requirements for Starting a Limited Liability Company
The following are other common requirements that a limited liability company will need:
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āregistered agent
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registered DBA (if needed)
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federal employer identification number from the IRS (if required)
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state employer identification number or a state tax number (if required by your state)
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business licenses and permits
Forming an LLC yourself can get complicated; that's why many business owners use a professional online filing service such as Zenbusiness.
If you need help forming a Professional Limited Liability Company, use MyCorporation.
For more detailed information about limited liability companies, read Nolo's latest edition book/ebook called:
Form Your Own Limited Liability Company: Create an LLC in Any State
Corporation
A corporation is a business structure that is a separate legal entity and is the most complex to form and manage. It can have one or multiple business owners.
Reasons for Forming a Corporation:
The following are common reasons why small business owners form a corporation:
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protection of personal assets from business lawsuits
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offers more options for tax savings
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a more formal business structure than a sole proprietorship and partnership
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stocks/shares can be issued
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easier to raise funds from investors
How to Form and Register a Corporation:
To form a corporation, you must file Articles of Incorporation with your state government and pay a state filing fee. In addition, you will also need to choose what type of corporation you will be forming, such as:
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C-Corp
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S-Corp (a separate IRS form must be filed)
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Professional Corporation (for certain licensed professionals and varies by state)
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Check your state's website to learn more about corporation filing requirements, costs, and ongoing maintenance.
Other Requirements for Starting a Corporation
The following are other common requirements that a corporation will need:
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corporate bylaws
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corporate meeting minutes
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āregistered agent
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registered DBA (if needed)
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federal employer identification number from the IRS
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state employer identification number or a state tax number (if required by your state)
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business licenses and permits
Forming a corporation yourself can get complicated; that's why many business owners use a professional online filing service such as Zenbusiness.
For more detailed information about corporations, read Nolo's latest edition book/ebook called:
Incorporate Your Business: A Step-By-Step Guide to Forming a Corporation in Any State
State Government Websites
Visit your state's website to learn more about business structures.