Choose a Business Structure and Register Your Business (2024)

FAQs

What business structure would you choose? ›

A sole proprietorship is easy to form and gives you complete control of your business. You're automatically considered to be a sole proprietorship if you do business activities but don't register as any other kind of business. Sole proprietorships do not produce a separate business entity.

The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A limited liability company (LLC) is a business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.

The best business structure for an insurance company depends on the size and growth plans of the company. LLCs and corporations offer limited liability protection and favorable tax treatment, while sole proprietorships are less complicated and may be a good option for small businesses.

Sole Proprietorship

Easy to Form – Sole Proprietorships are the easiest, most common, and least expensive business structure. A person is essentially a walking, talking sole proprietorship in waiting. All you need to do is sell something—a product, a service, anything—and boom … suddenly you're a sole proprietor.

The first and most common is a functional structure. It's also referred to as a bureaucratic organizational structure. It breaks up a company based on the specialization of its workforce. Most small-to-medium-sized businesses implement a functional structure.

There are three common types of businesses—sole proprietorship, partnership, and corporation—and each comes with its own set of advantages and disadvantages.

A simple structure is the most basic operating system that a business can use to centralize its activities. Also known as the flat structure, the simple organizational structure doesn't have multiple layers of management or formal departments.

Buildings, aircraft, skeletons, anthills, beaver dams, bridges and salt domes are all examples of load-bearing structures. The results of construction are divided into buildings and non-building structures, and make up the infrastructure of a human society.

Why do businesses need to choose a specific structure? ›

Organizational structure provides guidance to all employees by laying out the official reporting relationships that govern the workflow of the company. A formal outline of a company's structure makes it easier to add new positions in the company, as well, providing a flexible and ready means for growth.

Sole Proprietorship

Simplicity of organization-this is the most common form of business organization in the United States because it is the easiest and least expensive to establish.

A business structure, sometimes known as a business entity, refers to the form in which a business is established or maintained. The type of business entity used may impact how the owners of the business are taxed and the potential liabilities they may face under the laws of the state in which the business operates.

Member-Managed LLC: Better for Active Small Business Owners

A member-managed LLC includes members (owners) in company operations, making each an “agent” to officially act on behalf of the company. This structure doesn't necessarily require administrative responsibilities and power to be divided equally.

If you want sole or primary control of the business and its activities, a sole proprietorship or an LLC might be the best choice. You can negotiate such control in a partnership agreement as well. A corporation is constructed to have a board of directors that makes the major decisions that guide the company.

You must consider the industry your business is in, the number of owners involved, the desired liability and tax implications, and how you plan to grow. All of these factors determine which business structure is right for you.

Unlike sole proprietorships and partnerships, forming a corporation will legally separate the business from the business owner(s), which provides owners and investors personal protection against the company's liabilities. In addition, corporations are the preferred legal structure for lenders and investors.