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Choosing the best legal structure for your new company

On Behalf of | Feb 15, 2024 | Business Law

Deciding how your new business will be legally structured is a foundational process that can significantly impact your business’s future. This choice will affect everything from your ability to raise capital and the amount of taxes you’ll pay, to the level of personal liability you’ll face if something goes wrong.

Given all that is at stake, it is very important to carefully weigh the pros and cons of each option before committing to one approach over the others.

Sole proprietorships

This structure is the simplest business structure, ideal for individual self-starters focusing on services or small-scale operations. Its main advantage lies in its ease of setup and minimal regulatory requirements, allowing business owners to have complete control. However, it also means that an owner is personally liable for all business debts and obligations, which can be a significant risk.


There are different kinds of partnerships, including General Partnerships and Limited Partnerships. In a General Partnership, all partners share liability and management decisions, which can be both an asset and a liability. Limited Partnerships, on the other hand, allow for partners to limit their liability to their investment in the company while leaving the management to one or more general partners.

Limited Liability Companies (LLCs)

This structure combines the liability protection of a corporate structure with the tax benefits and flexibility of a partnership or sole proprietorship. This structure is highly adaptable and can suit a wide range of businesses, making it a popular choice for small to medium-sized ventures.


This offers the strongest protection against personal liability for its owners. However, it is also subject to stringent regulatory requirements, increased paperwork and potentially higher tax obligations due to double taxation on profits and dividends for C Corps. Corporations are best suited for businesses that plan to raise significant outside capital, go public or eventually be sold.

When choosing the legal structure for your new company, consider your business’s current needs and future goals. These foundational matters should inform your decision, as each structure suits different models to different degrees.