The advantages and disadvantages of the common types of business structures to help you choose the right business law for your small business

You may be thinking of starting your own business and this is a good thing. However, before you make any final decisions, it is important that you first figure out the type of business structure that you want to establish for yourself. The most common types of business structures that are available include partnerships, sole proprietorship, Limited Liability Company and corporation. Before making any decisions on the kind of business structure that you are going to choose, it is important that you think of the tax, legal and business law options that you have before anything else.


In this kind of business, the different owners are going to share the profits as well as the losses that are going to be associated with the business.

The advantages

  • You will not have to register with the state with the aim of paying fees so that you are able to start your partnership.
  • The filing of taxes is going to be easy since only the partners are the ones who are going to be taxed and not the business itself.

The disadvantages

  • All the partners who are involved are responsible for any kind of legal and business liabilities or debts.
  • If there is no trust between the partners, there could result in a breakout which would spoil the whole entire business.

A sole proprietorship

This is the type of business that is normally owned by one single person. There is normally no difference between the business and the owner of the business. All the profits and losses that the business is going to have accrue.

The advantages

  • They are easy to start up as well as discontinue because the owner of the business has full control over it.
  • The owner of the business takes all the profits of the business.
  • The owner is not subjected to corporate tax since he or she is supposed to pay taxes on profits alone.

The disadvantages

  • It may be difficult to raise capital since the business owner is going to have full control over the business.
  • The business owner is responsible for all the liabilities, risks, and debts that have been accrued.


These are the most common types of business formation that many people like to choose. What happens here is that it is normally given the legal rights as a kind of separate entity from the owner of the business.

The Advantages

  • Keeps the owner from being liable in case the company is sued.
  • The corporation pays separate taxes from the owner

The disadvantages

  • There is more paperwork to be done here.
  • The corporation may be taxed twice. On the profits of the company and on its dividends.