The Importance of Properly Structuring Your Business

Starting and structuring your business can be an exciting and daunting task. There are countless factors to consider, from writing a business plan to building a customer base. However, the one thing you need to get right from the very beginning, is how to structure your business properly. The type of entity you choose can have significant consequences for you, your business, and your assets. In this blog post, we’ll go through the advantages and disadvantages of each type of entity available for structuring your business so you can choose the best entity that meets your needs.

Sole Proprietorship

The first type of entity we will discuss is a sole proprietorship. This is the simplest form of entity for structuring your business, as you are the sole owner and operator of the business. One of the advantages of a sole proprietorship is that it’s easy to form and use for your business. However, the disadvantage is that you are also personally liable in the event of any business debts or lawsuits. This means your assets could be at risk. So if you are starting a business with a high chance of lawsuits or debts, a sole proprietorship might not be your best choice.


A partnership is the second entity you can use for structuring your business. This involves sharing the workload, profits, and liabilities with one or more partners. There are two types of partnerships: a general partnership and a limited partnership. In a general partnership, each partner has an equal say in managing and controlling the business. In a limited partnership, one partner has control over the management of the business, while the other partners are limited partners and have less control over the business. Therefore, it’s important to have a well-drafted partnership agreement to avoid misunderstandings between partners.

Limited Liability Company

The third entity type is an LLC or a limited liability company. The advantage of an LLC is that it offers flexibility in terms of taxation options. You can be taxed as a sole proprietorship, partnership, or corporation, each with different tax consequences. Therefore you can determine what is best for your situation. As the name suggests, an LLC offers limited liability protection for the owners. This means your assets are protected even if the business takes on debt or is sued.


The fourth and most well-known entity is the corporation. In a corporation, the business is a separate entity from the owners. This means the business can take on debt, sue, and be sued in its name. One advantage of a corporation is that it can raise funds by selling shares of stock. However, a corporation also has more formalities and expenses to comply with state and federal regulations. Additionally, corporations can be taxed twice – once at the corporate level and again when profits are distributed to shareholders.

The type of entity you choose for your business can have significant legal, financial, and tax implications. Each entity type has advantages and disadvantages depending on your business needs and personal situation. It’s important to consult with an attorney and tax professional to determine which entity is best for you. A properly structured business entity can protect your assets, minimize your taxes, and help you achieve your business goals. So take the time to choose the right entity for your business – it could make the difference between success and failure.

Let Us Help With Structuring Your Business Properly

At Kramer and Green, we pride ourselves on offering comprehensive corporate and taxation services to our business clients. We want to serve as your legal counsel from the time you formulate the idea to open a new business until you retire. We will accompany you on that journey every step of the way by giving you the legal advice you need, starting with structuring your business properly. 

Don’t hesitate to contact our office by calling (954) 884-8385 or looking us up online. We stand ready to tackle your most pressing legal issues and work to solve any problems that you may be experiencing.

Font Resize