When launching a business, there are a million and one things to do. You need to raise money, hire staff, develop a marketing strategy, and the list goes on. Before conducting business for profit you should choose a business entity structure.
This decision will have important legal and financial implications for your company. The amount of taxes you have to pay depends on your business entity choice, as does the ease with which you can get a small business loan or raise money from investors. And if someone sues your business, your business entity structure determines your risk exposure. State governments in the U.S. recognize more than a dozen different business entity types, but the average small business owner chooses between these six: sole proprietorship, general partnership, limited partnership (LP), limited liability company (LLC), C-corporation, and S-corporation. Among these options, there is no single “best” choice for all small businesses. Your choice of business entity is a very important one. It can affect how people perceive your business and has a big impact on your legal exposure and finances.