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Choose A Legal Structures For Your Business For Better Growth - Startup Business Bureau

Choose A Legal Structures For Your Business For Better Growth

legal structure chart

When your business is on the startup, there is a dire need to choose a legal business structure for better operation of the business. There are many legal structures available for the company to choose from according to the market.

A legal structure defines the taxation aspect, which a company has to pay to the government. Some of the legal business structures have to pay a high amount in the form of taxes, and some help to deduct the expenses related to taxation.

Types Of Legal Structures For Startup Business

Here we will introduce some kind of legal structures ideal for businesses that are widely accepted and opt for their business.

  • Sole Proprietorship
  • Partnership
  • LLC(Limited Liability Company)
  • S Corporation

Sole Proprietorship

Every person who works alone and deals with all the chores of the business is a sole proprietor. He is the sole owner of such a business, and all the responsibility lies upon the owner of that business. 

There are pros and cons of a sole proprietorship to consider while deciding to be a sole proprietor. 


  • Firstly, A single person holds all the powers related to business.
  • Secondly, The sole owner is at the same time owner and organizer of the business.
  • Thirdly, In a sole proprietorship, the owner has to pay fewer taxes than other legal structures. He is only liable to pay income tax primarily.
  • Fourthly, the management of the business is quite simple and easy.
  • Fifthly, there is no need to fulfill any legal formalities as compared to other legal structures.


  • The sole proprietor’s liability is unlimited.
  • He cannot grow business on a large scale.
  • Beneficial for only small businesses


The second legal structure term in business is the formation of partnerships. As it is clear from the name, the partnership is a business having a business partner. In partnerships, there may be two or more two people who agree to start a business with the contribution of money, skills, efforts, property, and any other ways. All the partners in a business are liable to face losses and benefits equally.

So this type of business is a good option if you have an excellent sincere partner ready to support the business. A partnership-based business is the same as a sole proprietorship. Still, the difference is only the number of business owners as a sole proprietorship only has one owner, but there are two or more in a partnership. Otherwise, the legal structure is the same as a sole proprietorship.

LLC ( Limited Liability Company)

An LLC is an advanced form of doing business. Every state of the USA allows the formation of an LLC but according to the rules and regulations of the relevant state. When you form a limited liability company, the number of business owners can be more than one, depending upon the shareholding percentage.

Limited liability company ensures the liability limited to the nominal value of the share and personal assets of the business owners are safe. However, LLC has to pay more taxes than the above-said business structures, and the time for the registration can be one or two weeks with some hundred dollar registration fee.

S Corporation

This is an advanced form of LLC. Incorporating the company publicly allows getting shares into the company’s capital to be a part of the corporation. Here people can invest in the form of money, property, infrastructure, etc. 

When a corporation earns profits, it gives the shareholders dividends as a profit. Both the corporation and the shareholders have to pay taxes on the profits they made. It is called a double tax. The formation procedure of a corporation is the same as an LLC.

So these are the well-known legal structures of the business that are good options according to the requirements of your business nature. However, if you need any further information, you can visit the startup business bureau for a better understanding.

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