Whether you’ve just graduated from college or are turning your old hobby into a livelihood, starting your own business requires a lot more than just passion. It also requires careful planning and procedural steps, such as hiring an attorney and deciding on a business structure. If you’re not sure what category your enterprise falls into, use this guide to make sense of the most common business types.

3 Types of Business Structures

1. Sole Proprietorship

This structure is suitable for solo entrepreneurs or those who want to retain their independence when they’re just getting started. In fact, you don’t even have to register as a sole proprietorship — you’re automatically in one when you offer products or services for money and have yet to register for another business type. 

In this situation, your personal assets and debts are lumped together with your business ones, which makes tax-paying a bit easier. However, it’s harder to get a loan, and you’ll be personally responsible for the business’s liabilities — such as in a lawsuit or with outstanding business credit card debts.

2. Partnership

If you’re ready to register your business with one or more trusted partners at your side, you can opt for a partnership. With a limited partnership, only one member of the group will have unlimited liability, which means they're responsible for the business’s debts and liabilities and have to pay self-employment taxes. 

In return, they get to make decisions for the business, while the limited partners act more like investors. With a limited liability partnership, all partners have limited liability, which means they won’t be held responsible for business debts or the wrongdoings of other partners. They'll also only be subject to taxes at the personal income level.

3. Limited Liability Company

Unlike a sole proprietorship, a limited liability company (LLC) separates your personal assets and liabilities from those of the business. Therefore, issues with your business credit card won’t affect your personal credit score, and a business bankruptcy won’t result in the loss of your family home.

As an LLC owner, you’ll need to pay self-employment taxes, but you won’t be subject to corporate taxes, which results in a lower tax rate overall. This is a great option for those who are steadily moving forward and expanding their business and want to protect their personal assets.

If you’re still not sure what the best structure might be for your company, reach out to the attorneys at Dyer & Rusbridge, P.C., of Canton, GA. They have over 50 years of combined experience helping entrepreneurs in Cherokee County settle on the ideal structure and complete the paperwork to make it official. They will also help you understand and negotiate contracts and leases down the line. To learn more about their business law skills, visit the website. Call (770) 479-7418 to schedule a consultation with a business attorney today.