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Choosing the Proper Legal Business Structure: the Difference Between Success and Failure

— July 8, 2021

A business can require outside funding at any time. Corporations will always have it easier when it comes to obtaining external funding compared to other business structures.

Businesses can fall into several categories, but whatever be your concern, you need to choose a business structure within the legal bounds of the system. You need to consider the start-up and operational, financial needs, risk assessment/management, and the ability to grow. Keep in mind that once you have established your structure, it might prove extremely challenging to make a switch. 

According to John Giorgi, you need to consider the following factors to decide on the legal structure of your business. 


You need to ensure that the company is heading in the right direction. Jot down the objectives of the business and try to understand the structure that aligns the best with the list. It will allow you to design the legal layout necessary for the growth you target. You should let go of anything that holds you back from fulfilling your potential. 


A sole proprietorship is always more straightforward compared to when there are partners and multiple owners. If you are going solo, all you need is to register your name, start your business, report the profits and pay your taxes. However, on the downside, you can face difficulties trying to procure funding from third-party sources. 

Liability concerns

Keep in mind that a corporation will always carry the least personal liability since it is its entity as per the laws. Creditors can sue the corporation, but no one can access the personal assets of the shareholders. You can glean similar benefits from an LLC as well but with the added tax benefits. However, in the case of partnerships, all the involved parties are equally liable. [Editor’s note: And with sole proprietorships, you as the owner are 100% liable.]

Tax questions

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In any business structure, profits are considered personal income and therefore get taxed accordingly at the end of every fiscal year. It is vital to understand that you can avoid taxation at the early stages by going for an LLC structure if you run a small business. It will ensure that the firm is taxed and not the owner. The office needs to file returns every year on the profit for a corporation, excluding the expenses and payroll. 


If you are looking to enjoy complete control, you need to consider a sole proprietorship or an LLC structure. In the case of a corporation, you need to remember that all the significant decisions that guide the company will come from the board of directors and shareholders. Sure, a sole owner can exercise a lot of control over a corporation entity during its inception. As the concern grows in stature, the board takes over the command to keep up with the diversifications. 

Capital investment

A business can require outside funding at any time. Corporations will always have it easier when it comes to obtaining external funding compared to other business structures. A sole proprietor might have to depend on personal credit or partners. 

Lastly, it would be best to remember that you will also need permits and licenses to make your venture completely legal besides registering your business. Keep in mind the factors when designing your company’s legal structure. All the best! 

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