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What should you consider when choosing a business entity?

You feel ready to follow through on your dream of starting a small business. This gives you cause for celebration, but it is also a time for deep consideration. How should you choose the right business entity?

Entrepreneur offers considerations to bear in mind while you decide. Learn how to choose between a corporation, sole proprietorship, an LLC and a partnership.


Just like with personal taxes, you likely want to do everything you can to minimize business taxes. If you want access to several tax options, a corporation may present the most favorable option. Consider business losses that your company may experience in its infant years, as they can lower your personal tax liability.


Depending on your chosen industry and business organization, you and your business could become vulnerable to legal liabilities. Besides looking into specific liabilities and their severity, consider which business entity offers the most legal insulation for your personal assets, such as real estate property and your vehicle. Partnerships and sole proprietorship provide the least legal protection while corporations offer the most.

Cost of formation and administration

Do you know how much it costs to maintain proper records and bookkeeping for your company? While you may like the idea of forming a corporation, you could lack the funds to do so. Minimize such costs by forming a sole proprietorship or partnership.

Business future

Think about where you see your business, industry and yourself going in the next several years. Choose a business entity not just for today, but for the future. If you desire or project growth for your company, consider forming a corporation so you can bring on stockholders to increase capital.